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Senator Hatch On The Tax Deal

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Senator Orrin Hatch joined me today to discuss the tax deal, the spending bill and START. The transcript is below.

HH: Beginning today’s program with Senator Orrin Hatch of the great state of Utah. Senator Hatch, welcome, it’s always a pleasure to talk with you, Senator.

OH: Nice to be with you, Hugh. You do a very, very good job. In fact, that book you wrote about Mitt Romney, I thought, was a real classic. It was really good.

HH: Well, thank you, Senator. Now at this hour, the House of Representatives is getting ready to punch a big hole in the deal negotiated between minority leader McConnell and the President. What will happen if they raise the estate tax, or lower the limit on the exemption when it gets back to the Senate?

OH: Well, that’s what they’re trying to do. They want to raise the estate tax up to 45%, the exemption down to $3.5 million, where we got it at 35% with the exemption at $5 million for an individual, and $10 million for a family. That’s far superior. I don’t know what’s going to happen, but I sure as heck hope they don’t do that, because you know, it costs about $.65 cents to collect a dollar of estate taxes. I mean, that’s just a stupid, dumb tax. And yet…and the really wealthy, they evade it. They avoid it. They get good lawyers, and they avoid it with trust work, and a whole array of other things so they don’t have to pay it. It’s the small family farm, the small business people, the local newspapers, these are the ones that get killed by having to come up after the first of the year with a 55% rate, or if you have a 45% rate, how do they borrow that kind of money and save their business or their farms? It’s just ridiculous.

HH: So if it does come back with that amendment, do you think the Senate might take that as a chance, or the Republicans, to walk away from the deal?

OH: I don’t know. It’s going to be…I would hope so, but it’s going to be a tough thing, because you know, the real problem is not so much the tax deal. That tax deal, if you look at that tax deal, it’s pretty favorable to Republicans. And I’d say about 88% of it is favorable, is really Republican policy. You’d have to include the 2% reduction in payroll tax in that, because it is a tax reduction, but that’s what I think would be a better…but I think actually you could include that and put it up to 88%. If not, it’s about 75% if you take that out. And that’s a pretty doggone good deal when you think about it. And besides, keep in mind, the AMT, the alternative minimum tax, which was configured to take care of 155 multimillionaires who didn’t pay taxes, that is now going to affect 28 million people. So we have to patch that. Personally, I’d rather just get rid of it and face whatever we have to, whether you have offsets or not for that. Secondly, the unemployment insurance, look, the Democrats always win on that. There’s just no question that that was going to be done. So if you really look at it, this is a pretty important Republican policy package. And it’s killing the liberals over in the House. The very, very avant garde liberals, are all just going crazy over it.

HH: Now Senator, we just disagree on this, but I’ve got a whole show to argue it, so I want to give you the chance to make your points.

OH: Sure.

HH: But I do want to make sure I understand. If they send this back and the House tries to up the estate tax, will you urge Senator McConnell to walk away from the deal, because at that point, it will be changed, and he will be under no obligation to stay by it if the House reneges.

OH: Well, I’m not so sure we should…I don’t want to commit to throwing this thing overboard, because I know this. If we don’t get something pretty darned close to what we have, come January 1st, we’re going to have all of these higher tax rates, and we’re going to send about $721 billion dollars to this liberal White House to keep the spending binge going. And that’s what’s going to happen. And yes, we have the House, but we don’t have the Senate. They still have 53 Senators, and we don’t have the White House that would veto almost anything we’d do. And so this is a really important thing. I’ll tell you what the more important issue is, and that’s the…and now this is an important issue, but the even more important issue is that 2,000 plus page, $1.2 trillion dollar omnibus spending bill, with about 6,700 earmarks on it that is facing us. So I think we’ve got to hold the line on that. That is just plain awful.

HH: Yeah, I want to come back to that.

OH: Okay.

HH: But I do want to, before we go there, one more time on this, because if they break the estate tax deal that the President got with the leader, it seems to me that all bets are off. And if they don’t hear Republicans saying that, they’re just going to raise the taxes. Don’t you agree?

OH: Well, that’s why I’m not going to say one way or the other. I’ll tell you, I’d hate to lose all the other things that we have over anything. But you know, we could not get that 35% estate tax through with a $5 million dollar exemption. We could not get that through when we had the majority in the Senate and House, and with Bush as president. So this is kind of a remarkable thing if you stop and think about it.

HH: Well, it’s only two years, though, right?

OH: It’s only two years, but keep in mind, this sets the stage that everybody’s going to know in the next election that if you reelect Obama, you’re going to get a lot higher taxes, especially if we don’t really take over both houses of Congress at that time, and have more strength. And you’re not only going to get more taxes, you’re going to get more everything that Republicans and conservatives and free enterprise people don’t want to have.

HH: All right. We’ll set it aside, because we just disagree on that. But I want to make sure we get out the stuff on the omnibus spending as well. Are you guys going to shut down the Senate rather than let this pass?

OH: Yeah, we are. We’re going to make them read the whole omnibus package, which is about 2,000 pages. And frankly, I believe…right now, they claim they have the votes on that omnibus. That is everything that is wrong with our country. I mean, we’ve had this last election where people have spoken, they’re tired of all the earmarks, and frankly, you know, everything that’s wrong is in that stinking bill. And yet, we have a number of Republicans who are going to vote for it.

HH: Now Senator, okay, now you brought it back. I’m kind of one of those who thinks that everything that’s wrong with the country was in that tax deal. It was done behind closed doors.

OH: I don’t think you’re right on that, because look, let’s just be honest about it. That tax bill, we would have, according to the Congressional Budget Office, if that tax bill doesn’t go through, we’ll have a 2% GDP hit. Now that’s the CBO saying that. And if the capital gains tax rate is increase from 15 to 20%, an independent study found that we would lose 231,000 jobs a year. Thirdly, if we don’t pass that tax bill, and Obama’s agreed to it, if we don’t pass that, then we’re voting to give this liberal White House $721 billion dollars more to spend, to keep their spending binge going. They won’t pay down one dime of the deficit with that $721 billion dollars. They’ll spend it. In fact, the President said he’s got a lot better ways to spend this money. The fact is every time Washington has raised taxes to allegedly reduce the deficit, Washington has never reduced the deficit. And that’s because, in fact, those tax hikes were always used to fund more government spending. So I don’t think you’re right on that, Hugh. I think we cannot give them that $721 billion bucks, and not fix all these other problems as well.

HH: Senator, I agree with the Teapartypatriots.org that you folks could do a much better deal, that they dare not allow those taxes to go through, and that they will blink, and that we want to have that fight right now. We want to have that showdown.

OH: Well, you got it, but I’m telling you right now, there is a significant number of Democrats who want all these rates to go up. Look, we don’t have a revenue problem in this country. We’re still getting 18-19% of the GDP in revenue. We have a spending problem, and it’s been made worse by this President, whose budget will double our deficits in five years, and triple it in ten years. And you know, conservatives do not support paying for tax relief, in other words, raising taxes to keep taxes low. That’s the American people’s money, not Washington’s. Those who want to pay for tax relief, or raise taxes to pay for tax relief, are Democrats. This is a huge difference between the parties. And you know, I don’t agree with you. I don’t think…let me tell you, there’s no…the Democrats would not do anything. They would love to have us block this bill.

HH: What are you hearing from your constituents, Senator Hatch?

OH: My constituents, I think, are with me on this. Now there are some who aren’t, and they’re generally the really far right people who think we ought to really let the country get in real economic distress so everybody realizes how really bad these people are.

HH: You don’t think there are any center-right conservatives like me who might be against this deal?

OH: Well, you are, and that’s been astounding to me, because you’re one of my favorite people. You’re one of the brightest guys in radio today, and I know how bright you are in the legal community. You have a real fan here.

HH: But I really do think that the Senate may be underestimating popular discontent with this, Senator Hatch.

OH: I don’t think so. I don’t think so. Do you know how difficult it was to get Obama to come with us this far? And I hate to quote Bernie Sanders, but he said by extending tax relief for two more years, that means it’ll be difficult to get rid of these lower tax rates. And he’s absolutely right. And if we don’t do it, it’ll be virtually impossible to get the low rates back, and I’ll tell you why.

HH: Senator Hatch is my guest…

OH: Let me tell you why.

HH: Well, I’ve got to go to break, Senator. Stick with me, and I will give you the floor, because I’m so glad someone from the Senate came on to defend it, because no one other than Orrin Hatch has been willing to come on and defend it. Obviously, they’ve got a lot of business going on right now. But Senator Hatch, one more into the breach.

– – – –

HH: Senator, I want to go back to the deal, but first, is START going to be ratified by this Congress?

OH: Well, you know, I think it’s a tragedy that they’re bringing this up in this context, because you’re having people voting on a START treaty who are no longer going to be here. They’ve been deselected. And why wouldn’t they wait over, just from a moral standpoint, and let those who are elected be able to take their places in the Senate? They’re off of it right now, because we’re reading on the floor, starting about 6:00 tonight, well, it’s already started, they’re reading the full omnibus bill, which will probably take about two days.

HH: And so if you had to predict, do you think the clock can be run out on START?

OH: Well, Harry Reid, I think, is going to keep us here until Christmas Eve, and that’s fine with me. He can keep us here until the 20th of January if he wants to. I’m going to fight some of these things. And I’ll live with whatever they decide to do. I’ve always been willing to do that. But we’re going to have to, I think just good logic says you should really look at START, the START treaty, and really go through it. And it usually takes at least two weeks, or ten full legislative days to just, you know, to really discuss something like that. It’s that important. And yet, they’re going to try and ram it through just like this huge omnibus bill with almost 7,000 earmarks in it, and try and ram it through here in the last few days? Boy, it’s hard for me to understand why any self-respecting Republican would vote for that dog, at 2,000 pages that nobody’s going to have read.

HH: You’ve got some colleagues, and I don’t want you to speak ill of your colleagues.

OH: Oh, I’m not going to do that.

HH: But Republicans, Republicans who are supporting this omnibus bill…

OH: Oh, I don’t understand why they are. And I notice that some of them are people who are leaving. You know, to be honest with you, that’s why these types of decisions shouldn’t be made in this atmosphere, right at the end of a session where, you know, a lot of people want to get out of it.

HH: So you mentioned Bernie Sanders in the last segment. And where are our Bernie Sanders? Where are the Republicans to go down…obviously, reading the bill is a good thing. But where will someone take the floor and just stay there until they fall over to stop this stuff?

OH: Oh, we’re doing that right now. I mean, that’s what we’re going to do. I’m taking the floor, each one of us is being assigned an hour, and I’ll take mine tomorrow. I’ve already agreed to it. But you know, go back to the other tax bill.

HH: Okay.

OH: Is there too much pork in that tax bill?

HH: Oh, you bet. Ethanol.

OH: Well no, wait. Wait, wait, wait. Clearly, there are provisions in that bill that Republicans are rightly concerned about, mainly the unpaid for extension of unemployment benefits, the extension of a select few 2009 tax provisions. However, we were able to prevent a long list of existing tax subsidies estimated at over $100 billion dollars from being extended, notably stimulus provisions like the Build American Bonds program, and grants in lieu of low income housing credit. The agreement is also noteworthy for killing the Making Work Pay credit. I could go on and on. And let me just…and also, unlike most Christmas tree legislation produced in Washington, this bill remains narrowly focused on tax and unemployment provisions, and is free from the usual add-ons. Let ms just say this. 15% of the bill happens to be new temporary tax incentive measures, in other words, payroll tax credit, bonus depreciation so that our businesses can deduct in the first year. About 71.5% happens to be in prevention of tax hikes on families and individuals from the ’01 and ’03 tax relief, extending those, the earned income tax credit, the child care credit, the American Opportunity credit. That’s 71.5%.

HH: What about the ethanol, the wind farms, and the rum subsidies?

OH: Wait, wait just a second. It contains certain expiring provisions for individuals and businesses through the calendar year. That’s $55 million dollars. That’s 6% of it. And it has temporary extension of unemployment insurance benefits, which they always win on, which is 7%. So they’ve got 13%, the rest is ours. Now are there some cats and dogs in there that we don’t like? Of course there are.

HH: Well, how can…

OH: The President couldn’t have agreed to it if it didn’t. But let me tell you, you know, what a lot of conservatives miss, and I know you don’t…now look, you’re one of the brightest guys in the country. I have great, great belief in you. And I’m surprised that you’re taking the tack that you are. But let me just say this. I’ve been here now 34 years. You know, this President, when he got the presidency, the bottom 40% of all wage earners don’t pay income taxes. And they get largesse from the federal government. That’s now up to 50%. And I think they’re going to take it to 60%. That’s one reason they love this health care bill, and some of these other things. And I’ve been here now for 34 years, and we have never had a fiscal conservative majority in the Senate.

HH: But Senator Hatch, you know how much I…

OH: Wait a minute. Let me finish that thought, though. You’ve always had three to six moderate to liberal Republicans. You’re seeing that on this omnibus bill, three to six moderate to liberal Republicans who will go with all the liberal Democrats on spending issues. And frankly, frankly, we’ve won battles by great presidential leadership, with Reagan, Bush I, Bush II, and even Clinton, and by just sheer guts around here. But we don’t, if we can’t get this…actually, 77%, 87% that’s favorable to Republican policies, we can’t get that through, I guarantee you we couldn’t do it when we had both houses and the president.

HH: All right. Now Senator Hatch, my point is we are on the edge of having a fiscal stroke.

OH: I agree with that.

HH: The bond markets are going to turn against us, and if we cannot summon the will to get rid of ethanol subsidies, rum subsidies and wind subsidies, the foreign markets will turn on us, and they will be justified in doing so.

OH: Well, I don’t disagree with that. But let me just say this. It’s going to be very difficult to get rid of some of these cats and dogs. There aren’t very many in this bill, but there’s enough to give me heartburn, and you heartburn. And I just have to say that this is going to be for two years. It sets the stage for the next presidential election. If you vote for Obama, you’re going to have massive tax increases, the most in the history of this country. You vote for whoever the Republican is, you’re going to have a continuation of what we have, in other words, the lower tax rates and an awful lot of other things, and we might even be able to really, for the first time in many, many decades, really do some thing about all the pork in our lives, in all of these things that are killing our country.

HH: Last question, Senator Hatch, the businessmen who have written me about this tax deal have said that the two year extension is not enough to encourage investment. It will not lower unemployment.

OH: I don’t agree with that. And let me tell you, it’s not…I wanted it to be permanent. That’s where I came from. And I said honestly in interviews in network television that I know they’re not going to take that. So we’re going to do the best we can. And two years is much better than they wanted to do. They wanted to do it just extend it over to the next, this next year, or at the most, one year, and then have all these prices go up again. What I tell you, what I’m telling you is I’ve been here long enough to know how this Congress works. I’ve been here for all these years without a fiscal conservative majority. And I’ve got to tell you, if we allowed that to happen, we’ll never get these tax rates done. And we will not win on this 87% or 88% of this battle that I think we’re going to win. And we can’t let the desire for protection be the enemy of the good here.

HH: And Senator, I’m out of time. I really appreciate you coming on, but I urge you, urge you to talk to your constituents, because I think that the Senators just don’t know what people think out there.

OH: Well, they’re mad, and they’re rightly so. But you’ve got to be practical, too. You’ve got to look at how is this place worked here all these years. And I guarantee you, if we don’t pass this tax thing, we’re going to have higher tax rates, and this country is going to have real difficulties in the future, because the Democrats are not going to do anything about solving some of these pork problems that you and I both agree on.

HH: Orrin Hatch, always a pleasure to have you on, Senator. Thank you for coming out and taking the tough questions and answering them. I greatly appreciate it. Merry Christmas to you. It’s always open to you on the Hugh Hewitt Show.

End of interview.

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