Pat Toomey

Mr. TOOMEY

Mr. TOOMEY. Madam President, I ask for the yeas and nays.

Mr. TOOMEY. Madam President, there are two things we know about reauthorizing the Ex-Im Bank. We know our taxpayers are subject to a risk for which they are not fairly compensated in the sense that Ex-Im necessarily systematically underprices the risk. That is precisely why a borrower goes to them. We also know it is unfair to a domestic competitor that cannot obtain the financing at the same rate that a foreign company can. We are told we should do this anyway because everyone else does it, because all of our competitors around the world subsidize their exports. So I would suggest the logical conclusion is we should work to phase out export subsidies all around the world. That is what this amendment does. It reauthorizes Ex-Im. It lifts the limit of the borrowing cap. But it makes it contingent on the administration beginning a process of negotiating a phaseout of export subsidies. It makes the second increase in the lending cap contingent on an actual agreement that will, over time, get us all out of the business of risking taxpayer dollars in export subsidies. I think this is a sensible way. It will allow an adjustment to take place for those who are dependent on this bank, but it will get taxpayers off the hook in time. So I urge support.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. TOOMEY. Mr. President, I ask that the reading of the amendment be dispensed with.

Mr. TOOMEY. Mr. President, I call up my amendment No. 2104, which is at the desk.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I rise this afternoon to speak against the so-called Buffett rule. This is a gimmick. It is a political gimmick. This is not a serious effort to deal with a ridiculously broken Tax Code. This is not a serious effort to deal with a completely broken budget. And, frankly, it is very disappointing to me that we are wasting time on this instead of dealing with both of those things. We have a Tax Code that is ridiculous, impossible to understand, counterproductive to economic growth, and that badly needs a complete overhaul that would simplify the Code, get rid of much unfairness, lower marginal rates, broaden the base, and encourage strong economic growth. Instead, we have this little gimmick because we don't have the political leadership to deal with the underlying real problem of a badly flawed Tax Code. Likewise on budget policy, this does nothing meaningful for our massive budget deficits that we have been running. In fact, this body chooses again for the third consecutive year not to even have a budget. It is unbelievable. Instead, we are going to waste time arguing about this political stunt. The President proposed a budget, at least. Unfortunately, it was not a serious budget, not a serious attempt to deal with the massive deficits we are running. It is the fourth consecutive year of trillion dollar deficits. Instead of dealing with that, we have this gimmick. Let's be clear. This is not a serious attempt to deal with tax reform or the budget. This so-called Buffett rule, this tax increase, would raise less than $5 billion a year. That amounts to about one-half of 1 percent of the $1 trillion deficit the President has proposed that we run. In fact, it would cover about 2 days' worth of the deficits we are running for 2013. Here is a chart that illustrates the deficit we will have under the President's policies without the Buffett tax. Here is the deficit we will have if we pass the Buffett tax. If you can't tell the difference, it is because there is no meaningful difference. Folks, we ought to be dealing with the real tax reform that we need to encourage economic growth and help reduce this deficit. Instead, we are wasting time with this. Since we are not doing what we ought to do, why are we having this argument? Unfortunately, it looks as though it is an effort on two fronts. One is to simply engage in class warfare, generate envy and resentment, and try to use that for political gain. And, secondly, it is an effort to distract from the underlying mismanagement of economic policy and fiscal policy we have seen from this administration. I know what the claim is from the other side. We hear this is all about making sure the rich pay their fair share. I have to say I have a little trouble taking lectures on fairness from folks who think taxpayers ought to be made to put $500 million into a solar energy company that does not have a competitive product, which drives it into bankruptcy at the cost to the taxpayers, from the same folks who want to force taxpayers to continue subsidizing plug-in cars people don't want to buy. That kind of crony capitalism and distorting of our economy at the expense of taxpayers doesn't strike me as fairness, so I have a hard time taking a lecture on fairness from people who advocate those things. But let's look at this Tax Code. If we want to talk about fairness, that is fine. How about the fact that, according to the Joint Committee on Taxation, almost half of all Americans today pay no income tax at all or actually receive money through the income tax code? The other half pays all of the taxes. We are hearing from our friends that that is not enough; they need to pay still more. My second chart will illustrate the point that according to the CBO, if we look at all Federal taxes, the middle quintile, the middle 20 percent of wage earners in America, pays about 14 percent as an average tax when you combine all the kinds of Federal taxes that are paid. The top 1 percent pays 30 percent. So it is more than twice as high--29.5, actually. If we look at just the income tax, the disparity is even bigger. If we look at the income tax alone, the middle quintile, the middle class, the middle 20 percent, when it comes to income tax alone on average pays about 3.3 percent as an effective average income tax rate. The top 1 percent pays 19 percent; that is, on average, almost 6 times as high. The fact is we have a very progressive tax system, not just by the historical measures of our own previous tax systems, but look everywhere else in the world. In fact, the United States, according to the OECD, has the most progressive tax system in the industrialized world. This is a chart that measures progressivity. Greater progressivity is in this direction; less is in this direction. As you can see, this ranking shows all the countries around the world that have less progressivity than the United States, which means that higher income Americans pay a greater share of income taxes and taxes generally than in any other country in the world. But again, we are told this is not enough. Clearly there is something else going on here, and here is what concerns me the most. The real consequence of this so-called Buffett rule, this tax increase, are that it is meant to be a tax on investment returns. It is a tax on capital gains and dividends. It is a tax that would upend decades of established law with respect to the differentiation we have put in place with respect to dividend income versus wage income. And it disregards the very sound reasons why we have created that distinction, one of which is that investment returns are taxed multiple times. We don't hear so much about that during this debate from my friends who are advocates for this new tax increase. But the fact is, first of all, it is only aftertax income that can be invested in the first place. So someone had to pay taxes on their earnings, and then after they have spent what they need to for their cost of living and if they have managed to save something which they then invest, they have already paid tax on that. Now the investment they have made--and let's say this is an investment in a corporate stock. Let's keep in mind that that corporation has to pay tax before they have an opportunity to provide a return on the investment that is made. And as it happens, in the United States, our corporations pay the highest corporate tax in the entire industrialized world, 35 percent. We have got a terrible corporate Tax Code that needs to be reformed in many ways. One of them is to lower this top marginal rate, but right now it is 35 percent. And what the proponents of this rule are saying is that after a corporation pays that 35 percent tax on whatever income they can earn, and when they then choose to dividend some of that remaining aftertax income to the people who own that company, they want those owners to pay yet another tax that is even higher than we pay now. We have a chart here that illustrates what the net effect of this is. Given that we have a 35-percent top corporate tax rate, and if we were to adopt this proposal to impose this 30-percent minimum tax, for an individual who has dividend income, first the company in which they invest pays a tax. Not all companies pay the 35-percent rate, but that is the top rate and it is in effect on many companies. Well, if the company has to pay 35 percent of a given $100 of income, they are left with $65 in corporate aftertax income. If that company then decides that the people who own it ought to get a dividend reflecting their ownership on that $65 that is available to be paid out as a dividend to investors, the proponents of the Buffett rule would have those investors pay another 30 percent. That is $19.50, leaving the investors with $45.50 out of the $100 of income. In other words, the government takes the lion's share of the income from this investment. The net effect of that, of course, is that it diminishes the incentive to make these investments in the first place. It makes other countries more attractive places to invest capital, to invest in a business to try to generate a return. There is another aspect that is disturbing about this which is, if you ask me, it is very reminiscent of the alternative minimum tax. We tried that once. In 1969, Congress decided there were some people who weren't paying enough in tax, and they said we are going to target a handful. Literally, it was 15 people--not 155,000 but 155 people who were subject to the alternative minimum tax, which was this confession of the absurdity of the Tax Code in the first place. Right? Junk the entire existing Tax Code and have yet a second parallel Code that will apply to just those rich 155 people. Well, guess what. Today that applies to tens of millions of Americans, and every year Congress has to do a temporary fix because it wasn't intended to do that. I would suggest if we go down this road, we are going to find that this tax--which we are told today would only apply to millionaires and billionaires, well, pretty soon the hard cold reality of the fact that it doesn't generate any revenue to speak of if you apply it just to millionaires and billionaires, means it is going to be expanded to the middle class and far more people, very much to our detriment. Finally, let me say that it is a bad idea to confiscate the capital which is the lifeblood of an economy. This next chart illustrates the critical role that investment plays in economic growth and in job creation. A couple of squiggly lines. But one thing you notice if you take a quick look is there is an inverse relationship here. When the black line goes up, the red line is going down. The black line is investment as a percentage of our economy. And when investment climbs--the red line is unemployment--you see, unemployment goes down. This is very well understood. It is capital invested in the economy that creates growth and creates jobs. What this rule would do is it would impose a new layer of additionally higher taxes on that very lifeblood of our economy. It is capital also that drives wages higher. We should never forget that fact. It is capital that allows the hunter-gatherer to have a hoe and become a farmer. It is capital that allows the farmer with a hoe to cast aside the hoe and drive a tractor and become far more productive. It is capital that allows the laborer who is digging with the shovel to put aside the shovel and drive a backhoe. And as I think everybody understands or should understand, the farmer who is using a tractor is producing more and has a higher income than the poor guy who is using a hoe. And the guy who is operating a backhoe has far more income and is far more productive than the guy who is using a shovel. It is capital that makes that possible. There is a metaphor I like about this, and I am not sure who to credit it to, but certainly I didn't invent it. I may not do it justice, but the gist of it is this: The comparison to the economy is that of a fruit tree. A farmer who has a fruit tree cultivates that tree so it will produce fruit, and the fruit is the income the farmer earns from the work he puts into cultivating that tree. If the government comes along and takes some of the fruit as a tax, as long as it doesn't take too much it still makes sense for the farmer to cultivate that tree so he can have that aftertax income. And as long as the government only takes a portion of the fruit, then the government is not diminishing the ability of the tree to produce that fruit. But if the government comes along and says in addition to taking a whole lot of the fruit, we want to saw off a branch because we want some firewood, that is a whole different matter. Because whatever you think of how many of those apples or whatever portion of that fruit you wish to take from the farmer, once you start cutting at the tree you are diminishing the ability of the tree to produce income for the good of the farmer and for society. That is what happens when we restrict capital, and I am afraid this is the path we would be going down if we adopt this. This is bad economic policy. We already have the most progressive Tax Code in the world, and very progressive by our own historical standards. For the sake of job growth, economic growth, and in the hopes that we will instead have a meaningful discussion about budget policy and tax reform, I urge my colleagues to vote no today on the cloture motion on the Buffett rule. I yield the floor.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I ask unanimous consent to speak as though in morning business.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I rise today to speak on H.R. 3606, the Jumpstart Our Business Startups, or JOBS, Act, which the Senate passed on Thursday, March 22, 2012, by a vote of 73 to 26. I am particularly pleased that H.R. 3606 included language from S. 1824, the Private Company Flexibility and Growth Act, which I introduced on November 8, 2011, with Senator Carper. We authored this important measure to update the shareholder threshold after which entities must register their securities with the Securities and Exchange Commission. This and other provisions contained in H.R. 3606 will provide companies and small banks with the flexibility to grow, which will in turn lead to economic growth and job creation. As the Commission amends its rules implementing title V of H.R. 3606, it is important that it be mindful of Congress's intent that the rules provide clear guidance to issuers on how to comply with the new provisions. For instance, section 503 of the JOBS Act requires that the SEC adopt safe harbor provisions that issuers can follow when determining whether holders of their securities received the securities pursuant to an employee compensation plan in transactions that were exempt from the registration requirements of section 5 of the Securities Act of 1933. The issues that we would expect the Commission to address when adopting the safe harbor provisions include the steps issuers can take to obtain comfort that securities are held by persons who received the securities pursuant to an employee compensation plan and whether the issuance of those securities were exempt from Securities Act registration. To provide issuers appropriate comfort under the rules, the Commission could adopt a safe harbor provision that allows issuers, absent actual knowledge of information to the contrary, to rely on information it has about a person at the time the securities are issued. The Commission could also adopt a safe harbor provision that allows issuers to consider an issuance of securities exempt from the Securities Act if it has a reasonable belief that the exemption existed at the time the securities were issued. The definition of an ``employee compensation plan'' should be interpreted broadly. For purposes of determining whether a person is an employee who need not be counted when an issuer is calculating the number of holders of record under section 12(g)(1)(A) of the Securities Exchange Act of 1934, the term ``employee'' would include persons who are current or former employees of the issuer. We would also include but not limit this exemption to other persons such as surviving spouses or family members who inherit equity securities from the employee and who need not be included in the calculation of the number of holders of record. ``Employee compensation plans'' would include but is not limited to a written compensatory benefit plan or written contract as defined in SEC rule 701 under the Securities Act of 1933. In revising rule 506 and rule 144A to remove the prohibitions on general solicitation or general advertising, the Commission should consider practice in the market for rule 144A securities and ensure that offerings and sales of rule 144A securities can proceed on the same basis as they do currently, including from a state blue sky perspective, regardless of whether there is general solicitation or general advertising. The Commission should also consider adopting similar safe harbor provisions for how issuers can determine whether their investors are accredited for purposes of revised Exchange Act section 12(g)(1)(A) and whether securities are held by persons who purchase such securities in crowdfunding transactions described under new Securities Act section 4(6), in accordance with new Exchange Act section 12(g)(5)(B). We believe these additional safe harbor protections would provide important guidance for issuers and should be strongly considered by the SEC.

Mr. TOOMEY

Mr. TOOMEY. Yes, that is my understanding. I thank Senator Hutchison for all of her hard work on the bank shareholder bill, and for clarifying this point.

Mr. TOOMEY. Mr. President, I think we are on the verge of doing something very constructive in this body, something very constructive for our economy, for the American people, for economic growth, and for job creation. After being in a Congress that has thus far been a little frustrating for the lack of progress we have made on this front, today is a very big day. We have a chance to pass a bill that has passed the House overwhelmingly with a huge bipartisan majority--a bill that the President of the United States has said he will sign into law. We have a chance to pass this, to have it signed into law, and to, thereby, enable small and growing businesses across America greater access to the capital they need to grow, to hire new workers, to help expand this economy, to really make some progress at a time when we need it badly. The bill I am talking about, of course, is the JOBS Act. It has passed the House 390 to 23--an overwhelming majority. It consists of a series of component measures I will talk about in a little bit in some detail--each of which has either passed the full House almost unanimously or at least in committee by overwhelming majorities. This is very broad bipartisan support. It is important, however, that to get to this point we need to defeat the amendment offered by my friend and colleague, whom I respect a great deal, the Senator from Rhode Island, who is offering an amendment that would have devastating unintended consequences--an amendment that does not merely weaken the progress we are going to make with this bill but would actually take us backwards from where we are today. The way in which it would do that--and I doubt this is the intent, but I am sure this is the consequence of this amendment--if it were enacted, this amendment would cause companies that are organized as private companies, for good and sufficient reasons--many for many years; they choose to be private companies because it is what is best for their business, their employees, and their customers--it would force many of them to become public companies against their will. Because a change in the rules, in the regulations by which we count the number of shareholders--as the amendment from the Senator from Rhode Island would do--would trigger this change in the status of these companies, having an enormously detrimental impact on many companies, raising their costs of compliance dramatically, making them less profitable. I am very concerned, for instance, among the many ways this could happen--one could be through ESOPs, the employee stock ownership plans. I know the Senator from Rhode Island believes they would not trigger this. I think it is very likely they would. Not only would this force private companies to go public against their will, but it would discourage the creation of employee ownership in companies. I think the last thing we want to do is discourage a very constructive way of compensating employees. So if we can defeat the Reed amendment, then we can move on to--I think we will have another amendment that will deal with crowdfunding. I do not know whether that passes. But either way we will be able to expand the opportunity of small companies to raise capital through crowdfunding mechanisms. Then we will have a final passage vote on what I think might be the most progrowth measure this body will consider perhaps this whole year. Let me walk through a couple of specific items. This is a chart I have in the Chamber that shows just a sampling of the organizations and institutions that support this bill. It is a wide range of businesses and business associations, folks who are in the business of launching new companies, of growing small companies. It is a long list. This is an incomplete subset of that list. As shown on this next chart, this is an important point I want to make; that is, there is a very vast range of investor protections that are completely unaddressed, completely unaffected by this legislation. The legislation is actually modest in the regulations it changes, and the categories it leaves in place to protect investors who are choosing to invest in companies--be they public or private--are quite extensive. A whole range of antifraud provisions that remain in full force are unaffected. A full range of SEC disclosure and reporting obligations remain entirely still in full force. There are governance rules that are unaffected by any of this legislation--proxy statements, reporting obligations. We have a very extensive body of law and regulation that very precisely controls all kinds of reporting and disclosure requirements designed to protect investors. It all stays in place. Investors remain very well protected if this legislation is enacted. I want to touch on the three aspects I think I am most excited about, and I will acknowledge my bias. These are three bills I introduced with Democratic cosponsors in the Senate, each of which has been rolled up into this package, in addition to the crowdfunding piece I alluded to earlier and a bill introduced by Senator Thune and others that is also part of this package. One of the pieces in this jobs package that is very constructive is a bill I introduced with Senator Tester. This is a bill that takes the existing regulation A in the securities law, the body of law-- regulation A allows companies to issue a security in a streamlined regulatory fashion. It streamlines the process. It reduces costs somewhat. The problem is, the current limit is only $5 million, making it not very practical for the vast majority of companies. Our bill would take that limit to $50 million and make this an option to raise capital and grow a business that would be available to far more companies. A second piece that I introduced with Senator Carper, and I am very grateful to Senator Carper for his work, is to lift the permissible number of shareholders that a small privately held business can have without triggering the full, very expensive, and onerous SEC compliance regime. Our bill would take that from a current level of 500 up to 2,000. There are many companies throughout Pennsylvania, across the country, that are successful. They are thriving, they are growing, but they have a number of shareholders that is bumping up against their limit. They are close to 500. They need to raise capital. They do not want to go public, and they have plenty of people who would like to invest in their successful business so they can grow. But they cannot do it because they are so close to the threshold. We would lift that threshold to 2,000 so they can raise more money in the private markets which is available to them. Then, finally, what is in some ways the centerpiece of this legislation in my mind is a bill I introduced with Senator Schumer, and I thank him for his work. This is a bill that facilitates going public. When a company reaches that point in its growth where--in order to grow further, in order to hire more workers, in order to expand--it needs to become a publicly traded company, we make it more affordable for more companies to do that, so they can do it sooner, they can grow sooner, they can hire the additional workers sooner. We do it with what we call an onramp. It is a process by which a company--if it has less than $1 billion in sales, less than $750 million in market flow--such a company would be able to do a public offering without being subject to all of the most expensive parts of the SEC regulatory regime. They would be required to comply with a big majority of all of the existing reporting requirements, but there would be some pieces--especially section 404(b) of the Sarbanes-Oxley Act, which is extremely complex and expensive to comply with--they would not have to fully comply with that for 5 years or until they reached $1 billion in sales or $750 million in market flow, whichever came first. So what we are doing with this part of the JOBS Act is we are giving small and growing companies an opportunity to grow into the ability to afford the most expensive regulation to which they would be subject. Nobody is exempted permanently. Everybody who goes public would be subject to the full panoply of regulations within 5 years or sooner if they grow faster, and it is only available to companies that have sales, as I said, of less than $1 billion. But that describes a great number of companies. I can tell you from personal experience, when a company is approaching that threshold of asking themselves: Should we go public-- we could grow, we could use the capital, we could deploy it to hire more workers, we could make constructive use of it--they also have to weigh the cost. The cost of compliance right now is huge, and we have seen a huge dropoff in the number of IPOs. We have seen a huge extension in the period of time between the successful launch of a company and the moment they do an IPO. We have seen that lengthen dramatically since we passed Sarbanes-Oxley. It is, in part, because it is so expensive to comply. So what we will be doing, if we pass this legislation today--which I certainly hope we will--is making it a little bit more affordable for companies to make that decision sooner, which means hiring workers sooner, which means growing sooner, which means more growth for our economy, more opportunities for all of the people we represent. So I am very optimistic. I am very pleased that we have been able to pull together such broad bipartisan support--this overwhelming vote in the House, the endorsement of the President of the United States, the support and cooperation with individual Democratic Senators who have cosponsored key pieces of this legislation. I do think it is equally important we defeat the Reed amendment so we do not actually go backwards in this process and have the unintended consequence of forcing currently private companies to become public against their will, forcing them to incur all kinds of costs that are actually counterproductive. If we can do that today, then I think we can pass this legislation. We know the President of the United States will sign it. We should do it as soon as we can. I wish to thank all my colleagues who played a role in advancing us to the point we are at today. I yield the floor and I suggest the absence of a quorum.

Mr. TOOMEY. Mr. President, I would like to yield myself 5 minutes to discuss the JOBS Act.

Mr. TOOMEY. Madam President, I claim the time in support of the legislation. I suggest that we are on the verge of doing something very constructive for our economy, for small businesses, and for job growth, and it might be one of the most constructive things we are going to do this year in that area. This legislation makes it easier and more affordable for young and growing companies to go public, to raise the capital they need to grow, to hire more workers. It also actually makes it easier for those who want to remain private and to attract more investors, and to do so without triggering the very onerous and expensive regulations attendant to being a public company. This is going to create more jobs and more growth in the economy. That is why it passed the House with a vote of 390 to 23. That is why the President of the United States has endorsed this bill and said he will sign it into law. That is why there are dozens and dozens of organizations and groups and companies and trade associations that support this legislation, so that we can do something right here, right now, today, that the President will sign into law, which will help small and growing companies raise the capital they need to grow. I urge my colleagues to vote yes.

Mr. TOOMEY

Mr. TOOMEY. I thank the Senator from Missouri and the Senator from Oregon for working together on this amendment. Under current regulations, the States are essentially required to adopt rules that would force a family farmer who is driving a tractor across the street to follow the same kinds of rules and regulations that a cross-country long-haul truckdriver has to comply with in terms of hours of service and regulations and logbooks. It is a solution in search of a problem. It is costly. It is unnecessary. I urge adoption of the amendment, and I yield back to the Senator from Oregon.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I ask unanimous consent to speak as in morning business.

Mr. TOOMEY. Mr. President, it is probably clear to all of us that the American people have a very high level of frustration with the lack of productivity of this Congress. The fact is, when we go home to our respective States, I am sure we are all hearing what I heard last week as I traveled across Pennsylvania. People ask me: Why can't you guys work together? Why can't you get something done? Why does it seem there is so much partisan bickering that you can't come together even on simple things that could help grow this economy, help make progress in these very difficult times? Well, on this front I think we have some good news, and I am delighted to talk about this tonight. I hope this early sign of good news reaches fruition and we actually have a meaningful accomplishment soon in this body as well as the other body. Specifically, I am referring to the work that has been coming together of late on a series of capital formation bills that will help small and growing companies raise the capital they need to expand, to hire new workers, to help improve our economy and give us a healthier economy with the job growth we badly need. In particular, I want to thank House majority leader Eric Cantor. Congressman Cantor took the step of pulling together a series of separate bills and putting them together in a package--a capital formation package. There is very broad support for this package in the House. I think under his leadership it is very likely to pass the House and will present a tremendous opportunity for us because there is broad bipartisan support for these commonsense reforms that will help companies raise capital and grow. The bipartisan support includes the President of the United States. Much to his credit, the President--I believe just yesterday--issued a formal Statement of Administrative Policy indicating his full support for the passage of the measure that Leader Cantor is proposing in the House. Many of these proposals come from the work that the President initiated. Some of them are included in the startup America jobs plan that the President proposed. Some of them were recommended by commissions that the President assembled. The President spoke about the need for enhancing small- and medium-sized companies' access to capital in his State of the Union Address. So I think the President has been very clear and very strong in his support as the House Republican leadership has been. In this body I think the leadership on both sides of the aisle has indicated support. The majority leader and the minority leader have both indicated their support for moving in this direction. The chairman and the ranking member of the Banking Committee have expressed a desire to move forward with the capital formation package, and there is wide support among outside groups. In fact, there is very broad support and very little opposition. The support includes support of entrepreneurs, whether they be from convenience stores, financial services firms, or high-tech firms. In Pennsylvania, the life science companies feel very strongly about this because for them access to capital is a huge challenge. It is the absolutely essential precondition for their growth, and they are not alone. Manufacturers generally, supermarkets, all kinds of trade associations, the support for these kinds of capital foundation bills is very broad. I want to touch specifically on three of the bills that I have been working on for quite some time now, and I am very hopeful and optimistic. First of all, these three bills are among six bills. The House companion version of these bills is in the package that Leader Cantor has proposed, and I believe there is broad support in this body for these bills as well. The first I want to refer to is a bill that I have introduced with Senator Tester. It is S. 1544, and it is called the Small Company Capital Formation Act. It is more commonly known as the reg A bill. What it does is lift the current ceiling on the amount of money that a business can raise under the regulation provision of the securities law. That is a provision that allows a small company to issue a modest amount of debt or equity without being subject to the full range of very costly regulations. The limit has been at $5 million for many years, and the bill that Senator Tester and I have proposed would raise that limit to $50 million. It has not been updated in almost two decades, and there is no question that raising the ceiling would allow a lot of companies that need to raise substantially more than $5 million the ability to do so and to thereby grow. This is something the President has supported as well, and it passed the House by a pretty stunning margin of 421 to 1. It was not very controversial. I don't think it is controversial here, so I am glad this bill is included in this package in the House. The second bill I would like to mention is S. 1824, the Toomey-Carper bill. It has to do with the limit on the number of shareholders a closely held company can have without triggering the full SEC compliance. Currently, that limit is at 500 shareholders. If you reach 500 or go above 500, then you are treated as a public company such as ExxonMobile for reporting purposes. That might have been appropriate many years ago, but in the modern era where communication is so much easier, access to information is so much greater and so much faster, the necessary information for shareholders can be distributed more broadly, more quickly, more easily, it is high time we raised that limit from 500 to 2,000 as this bill would do. I appreciate Senator Carper's support for this legislation. This is a bill that has a companion measure in the House that was raised at the House Financial Services Committee. They voted on it. They voted by voice vote and approved it. By voice vote that means, generally speaking, there is no opposition and nobody bothered with the rollcall vote because everybody supported it. That is a big, broad committee that represents virtually every constituency in the House of Representatives, and it was passed by a voice vote. This has very strong and broad support. The third bill I want to mention is S. 1933, the Schumer-Toomey bill. The technical name is Reopening American Capital Markets to Emerging Growth Companies Act. We call this more colloquially the on-ramp bill. The reason we call it that is because we think of it as an on-ramp to becoming a publicly traded company, a path to launching an IPO that will facilitate this. There has been a big reduction in the number of IPOs that occur in the United States. The IPO, initial public offering, is the process by which a private company becomes a public company. It can be a very substantial opportunity to raise capital. As I mentioned earlier, when companies raise capital, they put that money to work by expanding and hiring new workers. An IPO is a hugely important step in a company's progress and almost invariably follows a substantial increase in hiring, and that is why this is so important. One of the reasons companies are slower to go public now than they were in the past is because we in Congress created a much more expensive set of regulations when a company does go public. Part of that is the Sarbanes-Oxley bill, and certain features within Sarbanes- Oxley are enormously complex and expensive to comply with. Our bill says if you are a relatively small company--specifically, less than $1 billion in revenues or less than $700 million in public float, the amount of stock that is traded, then you can do an IPO without having to comply with all of the Sarbanes-Oxley regulations immediately. Over time you will have to comply if you exceed those thresholds that I mentioned, or within 5 years. In any case, you have to comply as everybody else does, but at least you have the opportunity to grow and the ability to afford the expense that is associated with it. A companion measure to this bill--an identical version in the House was considered by the House Financial Services Committee, and that passed just a week ago. It passed the Financial Services Committee by a vote of 54 to 1. This is not very controversial. This has very broad bipartisan support, and this is the kind of legislation that is going to help businesses grow. I cannot stress enough the link between raising capital and growing one's company and hiring new workers. Capital and jobs are completely linked. What these bills will do, together with the other bills that make the broader package, is they will encourage a wealthier economy, stronger job growth, and more people working. Let me stress one other aspect about this that I think is important to note. This came out at a hearing we had earlier this week on this very topic; that is, for many small companies, young companies, growing companies, there are a number of steps along the way to becoming a larger and more successful company, employing more people. There are a number of steps along the way in raising capital that can start with an angel investor, followed by venture capital, followed by private equity, followed by maybe a securities issuance, followed by an IPO. This sequence of capital-raising is very important. If you facilitate any one step along the way, as these bills would, the experts who came and testified before our committee confirmed that by facilitating one step along the way, you facilitate the capital-raising at the earlier steps because what happens is the investors are more confident they will have the opportunity to liquidate their investment at a later stage if they see that the regulations have been made more amenable to that liquidation further down the road. So even if a company is not yet necessarily poised, for instance, to do the IPO, the fact that the IPO is easier to achieve when that company gets there increases their chance of raising money now through other vehicles, through other sources, and therefore increases their ability to grow. I am very enthusiastic, as my colleagues can tell, about this legislation--certainly the three bills I have been working on and the other bills as well, which are a perfect complement to this and really constitute a portfolio of bills that will facilitate portfolio-raising across the board. I thank my Democratic cosponsors of these particular bills, including Senators Tester, Carper, and Schumer, for working with me. I also wish to commend Leader McConnell for his leadership and Senator Reid for his, as well as Ranking Member Shelby and Chairman Johnson. I think what our constituents have been telling us for a long time is they want to see us working together and doing what is right for our country, for our economy, for job growth. This is a wonderful opportunity to do that. I think it is quite likely that a package of these bills is going to pass the House very soon. I hope some comparable measure will pass in the Senate. The President has already indicated he supports it and wants to sign it. I don't think we should waste any time at all in passing the legislation that will be good for small and medium-sized businesses and good for their ability to grow and hire more workers. With that, Mr. President, I yield the floor and suggest the absence of a quorum.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I ask for the yeas and nays.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I rise today to speak about an important reimbursement issue that impacts the lives of millions of Medicare beneficiaries and providers. The sustainable growth rate, SGR, originally implemented in 1997 through the Balanced Budget Act, was intended to constrain overall Medicare spending growth in physician services. However, since 2002, actual expenditures for physician services have exceeded allowed targets, yielding negative updates in prospective years. As a result, Congress intervened 13 times to preempt a physician payment cut. In doing so, they failed to address the underlying issue and sustained a flawed reimbursement mechanism. With each year that passes, the cost of `fixing' the SGR grows, amounting to an albatross of several hundred billion dollars. Consequently, on March 1, 2012, Medicare physicians will face a 27.4 percent cut to their reimbursement. Our budget baseline perpetuates an illusory premise that these cuts will occur. However, it's widely acknowledged that if implemented, these cuts would have a debilitative effect on medical practices and Medicare beneficiaries. As Congress looks to yet again preempt a physician payment cut, I believe it is imperative that we identify a viable pathway to replacing the SGR. We can begin by utilizing Overseas Contingency Operations, OCO, funding to pay for the $195 billion in accrued SGR retrospective debt. OCO funds, deemed to be budgetary savings from the drawdown of military engagement in Iraq and Afghanistan, can be appropriately reallocated against accrued SGR debt that will not be collected. This would not constitute new spending, but rather amount to a down payment on an SGR fix. I urge conferees to give strong consideration to utilizing OCO funding to offset SGR's retrospective debt. It's time that Congress use honest budgeting and provide Pennsylvania's 2.2 million Medicare beneficiaries and 155,776 employees of medical practices, with some certainty. I yield the floor.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, I thank Senator Portman for organizing this colloquy and Senator Johnson for his contribution. Let me start by making this point: It seems to me the two top priorities the budget--and most of what we do--ought to have are, No. 1, policies that will help encourage strong economic growth, a recovery that we need and the job creation that would come with it--that is No. 1--and No. 2, putting our Federal Government on a sustainable path because we are not on a sustainable fiscal path now, and if we do not get on a sustainable path soon, we are inviting a crisis. We are inviting a disaster. It is my view that the President's budget fails badly on both fronts. On the economic front, there are a number of areas. First and foremost is a budget that proposes a growing budget deficit. The President who promised us in his first term he would cut the deficit in half, in fact, is proposing in fiscal year 2012--this year--a deficit that is bigger than last year and almost as big as the alltime record high-- nowhere near cutting these deficits in half. Huge deficits themselves have a chilling effect on economic growth because they discourage investment. Everybody knows when we are racking up massive amounts of debt, unprecedented amounts of debt--as we are doing right now--there is a huge threat that the result will be either dramatic inflation or much higher taxes or both. Given that threat, businesses and entrepreneurs, understandably, are reluctant to take a risk, to make an investment, to grow a business, to hire workers. So that is point No. 1. Point No. 2 that I would like to make is a little bit more technical and very specific; that is, the President's idea that we ought to tax dividend income, which is to say investment in business, at ordinary income rates instead of at the current 15-percent rate. I just want to illustrate why I think that is a particularly bad idea and why it will hurt our economy and weaken our ability to create jobs. This little chart demonstrates what this means is, what the President is proposing is effectively a 63-percent tax on investment in a business. The reason I say that is as follows: If you can imagine, let's say you have saved some money and you want to invest in a business so that business can grow and hire workers. How will these taxes be paid? Right now, we have just about the highest corporate income tax rate in the world. So if you make an investment in a business and that business makes a profit, the first thing that company has to do is pay $35 of every $100 it makes. Let's assume the company makes $100. At the 35-percent top income tax rate that the company pays, $35 is taken, goes to the government. So the aftertax income for that business is $65. That is what the owners of the business get, right? Not quite. If the dividend is then paid to the owners of the business, the President wants that to be taxed now at the ordinary income tax rate. By the way, he wants that rate to go from the current rate of 35 percent up to 43.4 percent. A top marginal income tax rate of 39.6 percent, plus the 3.8 percent from the health care bill that was passed, brings the top marginal income tax rate to 43 percent. I know this gets a little bit confusing, but at the end of the day, it is not that complicated. The $65 that is remaining after the corporation pays its income tax--if that gets paid to the investor-- that now, under the President's plan, would be subject to a 43-percent further tax. That is another $28 that gets taken from that initial $100 of income, leaving the investor with $37 out of the $100 this business makes. So the President's plan is, if you want to invest in a business to help grow this economy and create jobs, the business--your activity--will be subject to having almost two-thirds of the income taken and you are left with about one-third. What is the net effect? It is a huge disincentive to invest, to grow a business, to take a risk. Most of the rest of the world does not have tax rates this high, does not have a corporate tax rate this high, and therefore it is a further incentive for capital to move elsewhere. I think we ought to pursue policies that encourage maximum economic growth, not policies that absolutely discourage savings and investment and the growth that comes with it. If Senator Portman tells me I have a couple of other minutes, I will make one more point; that is, to switch to the sustainable fiscal profile which we are not on now. The President, to his credit, has put his finger on precisely what is the long-term problem we face. He has described it as the mandatory health care spending, the entitlement programs, as a general matter. He is exactly right. When we look at his budget, it is very revealing. If we take just the following categories--Medicare, Social Security, Medicaid, and interest on our debt, just those items--and look at what the President has proposed for those items over the next 10 years, it is an average annual increase of almost 8 percent--7.8 percent to be precise. But he is only proposing that the economy is going to be able to grow by about 5 percent. Frankly, that is optimistic. So what happens if we have huge government programs growing faster than the economy each and every year for as far as the eye can see? That is the definition of unsustainable because these programs consume ever more of the budget and ever more of the economy until something has to collapse. This is why I am so disappointed the President has not so much as suggested an idea for how we might reform the long-term, totally unsustainable path they are on. Most of us--Republicans in this body and in the other body--believe we need to make some changes for future retirees. We are not talking about changing the rules for people who are currently retired or about to retire but people my age and younger and my kids. When are we going to acknowledge that we have to fix this so these programs can survive for the next generation? If we refuse, if we continue to go on this path, we are going to face the kind of financial crisis they are facing in Europe. We have a limited window of opportunity to solve this. It is not too late for us to avoid the fate of our friends on the other side of the Atlantic. But I would suggest we do not have time to lose. I think the President has missed the big opportunity to provide some leadership. I hope we will make up for that in this body. With that, I would be happy to yield back to my colleague from Ohio.

Mr. TOOMEY

Mr. TOOMEY. Mr. President, today I wish to speak about an important health issue that impacts the lives of many people across the country. Each year, more than 18,000 Americans are diagnosed with a serious blood disease and require a bone marrow transplant. Unfortunately, only 30 percent of those patients in need will find a suitable match within their family. Although about 5,000 patients each year receive a marrow transplant, others will pass away while awaiting a match. Since 1987, the National Marrow Donor Program, NMDP, now publically known as Be The Match, has undertaken a laudable effort to connect transplant patients with healthy, unrelated donors through the Be The Match Registry. Today, the registry includes more than 9.5 million registered donors. Despite their success in raising awareness and soliciting support, a small percentage of our population is registered. Patients from ethnic and minority communities face particular difficulty in finding matches due to limited diversity within the registry, further complicating the search for a viable genetic match. Deutsche Knochenmarkspenderdatei gGmbH, DKMS, currently the largest bone marrow donor center in the world, shares Be The Match's commitment to increasing donor recruitment and diversifying the marrow donor registry. This year, marrow donor registry drives will take place in communities across America. One in particular, known as Simon's Saturday, will take place in Emmaus, PA. The bone marrow donor drive is named after Simon Ernst, an energetic 8-year-old from Upper Milford, who is bravely battling leukemia and awaiting a bone marrow transplant. Participation in the marrow donor registry is simple and safe. Interested participants must meet the age and health requirements, fill out a registration form, and provide a swab of cheek cells. I would like to encourage those interested to attend a bone marrow drive in their community or to join online by visiting the NDMP website at www.BeTheMatch.org or the DKMS website at www.getswabbed.org. The bone marrow donor program is a cause close to my family's heart, which is why I intend to participate in a bone marrow registry drive on February 18, 2012. This issue is especially important to my wife Kris, who has been a registered donor through Be The Match for the last 16 years, and I look forward to joining her and the more than 9.5 million individuals who have already joined. Together we can help provide hope and save lives.

Mr. TOOMEY

Mr. TOOMEY. Madam President, reserving the right to object, if the Senator will grant 1 minute on his amendment, then I will not object.

Mr. TOOMEY. Madam President, the Senator from Arizona is absolutely correct. The Earmark Elimination Act is not intended to preclude Congress from effectuating legal settlements, such as Indian water rights settlements, that resolve claims against the United States. This body must maintain its ability to avoid costly litigation and to limit the legal exposure of the United States in a manner that ultimately benefits American taxpayers.

Mr. TOOMEY. Madam President, I rise in support of my amendment. I wish to thank Senator McCaskill for cosponsoring this amendment and for her support on this ban on earmarks. What this amendment does is it would codify the current moratorium that is in place. I commend the majority Senators for extending that moratorium, but let's just codify this now, put this in place, and end this process that lacks any transparency. This is a surgical point of order that would not be held against the entire bill but, rather, just the specific earmark. Unlike the next amendment, which would allow earmarks on authorization bills and would permit, for instance, earmarking of the ``bridge to nowhere'' and would only forbid earmarks on appropriations bills, this would be a ban on earmarks of all kinds. Some suggest that we would be ceding our constitutional control of the purse strings. This is clearly not true. Most of all government spending is not earmarked. Most discretionary spending is not earmarked. That doesn't mean we have ceded our authority to the executive branch. The fact is, we define the terms and the rules under which the spending can occur. That is appropriate, but it ought to happen under scrutiny and should be subject to full review.

Mr. TOOMEY. Madam President, I ask for the yeas and nays.

Mr. TOOMEY. Madam President, I point out that the Constitution doesn't make a distinction between an authorizing committee and an appropriating committee. I don't think we ought to be having the discussion and argument over who gets the earmark and who doesn't. It is the process that is flawed. It is the process that doesn't have the kind of scrutiny and the transparency and is not subject to competition the way it ought to be before taxpayer dollars are spent. So my objection is to this process wherever this occurs in the Senate or the House. While I respect the intentions of my colleague from Oklahoma, I disagree with him. I suggest a ``no'' vote.