Mar 7, 2012 -
I rise in support of this bill, Mr. Speaker. I would like to thank my colleagues on both sides of the aisle who have worked long and hard on a number of these bills.
In my remarks today, Mr. Speaker, I want to talk about the good, the bad, and the ugly: the good that these bills can do to free up our capital markets, but the bad and the ugly of issues that are more substantial to job creation and the fiscal integrity of our country, which this Congress continues to ignore.
First, to respond to my colleague from Texas who several times blamed one particular party in the Senate for advancing these bills, I would just like to remind my colleague that many of these bills are sponsored by Democrats in the Senate. It's not Democrats or Republicans in the Senate; it is the Senate that needs to pass this. And as we know, the Senate requires 60 votes. So I would hope that the gentleman from Texas would amend his future remarks and call upon the Senate to pass the JOBS Act rather than just the Democrats in the Senate, of course recognizing that Republican votes are needed to reach the necessary 60 votes to advance any legislation.
It will take votes from both sides to get to 60 votes. I think they can do that. And many of these bills before the House have had 400 votes, 90 percent of this body. Hopefully, they will command similarly large supermajorities in the Senate, comprised of both Democrats, many of whom sponsored these bills, and Republicans, who may be opposed to certain elements but hopefully, in the name of moving the country forward, will pass this JOBS Act.
Here's what this bill will do.
First of all, it's not a JOBS Act, per se. The JOBS name is an acronym. It actually is called Jumpstart Our Business Startups Act, or JOBSA, but I guess JOBS sounds better. But what it really affects is capital markets. It is really a capital market bill. It is a good bill. It has several components that have already passed the House. My colleague from Texas outlined several of them. I want to explain why they are so important.
First and foremost, it makes it easier for many small companies to go public. It rolls back some of the Sarbanes-Oxley regulations that were put in place in 2002 for small and medium-cap companies. Again, when you're looking at the compliance cost of Sarbanes-Oxley, they don't scale with the business. So it's de minimis for a $10 billion business, but it's substantial and, in fact, a deterrent to accessing the capital markets for a $100 million or a $300 million business. So this, in fact, rolls them back in a very thoughtful way.
And I would further call for reexamination, of course, of the requirements for businesses of all sizes, but this will allow many small and mid-cap businesses to access the public capital markets.
In addition, it allows people to invest in start-ups, a concept that's called crowdfunding, which is very exciting. Of course, heretofore, essentially, investing in start-ups has been restricted to what are called accredited investors. Now, an accredited investor is not just some investor that goes through some process of getting accredited; it's basically somebody who's wealthy. They have to be worth several million dollars; and then, all of a sudden, they're accredited.
Now, we all know that some wealthy people are poor investors and some are good investors. One's wealth has nothing to do with how accredited or how good an investor one is. And families who are worth $100,000 or families that are worth $300,000 are perfectly within their rights under current law to go to Las Vegas or Atlantic City and bet their entire lifesavings on one roll of the dice; and yet they're not allowed, under current law, to invest in start-ups.
So, we, with this bill, would allow families of all means to invest in start-up companies, some of which will work out and some of which will not. American families will enter this being aware of the risks. But, again, it is their money, they earned it, they've paid taxes on it, and they should be able to invest it and/or gamble it as they see fit.
Another thing we do under this bill is increase the number of shareholders that is required for mandatory registration with the FCC from 500 to 1,000. This is very important because many companies use stock options, which is a good practice. It gets the employees to own part of the company, to own part of the fruits of their labor, and to have some of the upside on the equity. But companies have effectively been limited on this because once they have 500 shareholders, they're forced to file as public. So we're allowing them to stay private longer, as the need fits them, and not have to scale back on their option policy with their employees. Inevitably, some of those options get exercised, and employees become outright owners over time. This would prevent them from being forced into a backdoor IPO.
In addition, we, again, allow community banks to raise additional capital. We remove some of the requirements around that. Community banks are important lenders in our community; and that's an important step, as well, towards allowing capital to flow more freely.
So, in sum, the several bills, most of which have already passed this House, that we are packaging in the JOBS Act, this act that we're doing here today, are good bills that will free up the capital markets. And, yes, in the medium and long term, there will likely be some jobs created, because where will that capital go? It will flow to businesses that will encourage job growth. This is not something that happens overnight, but this is something that happens as a fruit of the investment. Some of these start-ups that are funded through crowdfunding might, in fact, be employers of 1,000 people in 5 years or 10 years. And that's what's so exciting about the potential of these mechanisms to create value in the economy.
But what are we not doing? And what would be a real jobs bill? In my opinion, there's really several things that are holding back our private sector recovery. First and foremost is our budget deficit and the questions about the fiscal integrity of this country. This Congress continues to avoid taking action on a default scenario under which debt as a percentage of GDP would rise from about 70 percent where it is now to about 200 percent of our GDP by 2040, a far worse situation than many of the fiscally beleaguered nations in Europe that are currently undertaking bailouts.
This is widely known on both sides of the aisle, and, in fact, the solution is widely known, as well. There are several that have been presented. There's a bipartisan group that emerged from the Senate, including Democrats and Republicans, that proposed a plan to reduce the deficit as a percentage of GDP down to 1.9 percent by 2021. There's been a similar effort on behalf of the Bowles-Simpson Commission, again, to rein in fiscal spending so that debt as a percentage of GDP would be 35 percent instead of 200 percent by 2040.
This Congress has not advanced either and, in fact, quite to the contrary, has passed an operational budget that only serves to continue these deficits through the next 10 years. Again, giving fiscal certainty around the integrity of our Nation would do a lot more to free up capital and improve the flow of capital and credit markets and create jobs than these relatively minor, but still important, bills that we're considering here today.
The other reform that would create a lot more jobs in this bill, and I think would better be called a Jobs Act, if they could come up with a fancy acronym for it, is business tax reform.
I'd like to submit to the Record a recent report from the White House and the Department of the Treasury on a framework for business tax reform.
The President has proposed eliminating loopholes and special interest tax deductions in our corporate Tax Code to lower the rate to 25 to 28 percent from 35 percent. American corporations are currently among the highest taxed in the world. Most of our peer countries tax their corporations in the 20 to 25 percent range, and capital can flow across borders, operations of companies in a global economy can flow across borders. Why would a for-profit company with a fiduciary responsibility to its shareholders choose to domicile in an area where they have to pay a 35-percent tax rate when they can pay a 20- or 25-percent tax rate and also exist in an environment that ensures the surety of law?
What the President's tax reform proposal will do--and many of us on both sides of the aisle have been calling for similar reforms over the last several years--is, again, on a revenue-neutral basis remove many of the special interest tax considerations that were put there by lobbyists in our Tax Code and bring down the overall rate to 25 to 28 percent so that companies can reinvest in their growth. It tends to be the more profitable companies, the companies that are therefore paying corporate tax, that are the highest growth companies.
So it directly affects job creation to say that profitable American companies should be paying 25 to 28 percent instead of 35 percent, discouraging them from outsourcing jobs, discouraging them from domiciling overseas, and also discouraging the improper allocation of capital through special interest tax breaks in our Tax Code that give money arbitrarily to everybody from wooden arrow manufacturers to the oil and gas industry simply because some central planner in Washington determined that that's where capital should go.
So, again, if we really want a jobs act, let's solve the deficit, let's reform our uncompetitive business Tax Code, as the President has indicated; but, yes, let's also move forward with these bills to free up capital flow for start-ups that will hopefully lead to the next great American companies.
But by no means should somehow this Congress think that just because there's some letters that stand for the word ``jobs'' that somehow the jobs issue is solved or addressed by allowing companies to stay private with 1,000 instead of 500 shareholders, allowing a few small and mid-cap companies in the margins to go public because of relaxed Sarbanes-Oxley requirements. These are great things.
Let's pass this bill. I'm confident it will pass overwhelmingly. Let's call upon the Senate to pass it. But let's not pretend that this is some kind of jobs bill for our country or that this, in any way, shape, or form restores the fiscal integrity of our Nation.