Transcripts For CSPAN Joint Economic Committee On Tax Reform 20171026

He called for reducing the Corporate Tax rate in eliminating regulations to stimulate Economic Growth. This is an hour and 20 minutes. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2017] our hearings have produced useful information and insights. Pleased toularly have insights on the forces and constraints that are holding back Labor Force Participation and wages. We hope to get a clearer picture of how the right policies can help the economy recover its will potential. The economy is dealing with the aging of a population, the slowing of population growth, and technological changes that are altering the methods of production in america area selfimposed constraints have also alter the way the economy performs and not in a good way. I strongly believe we can do something about that here in the United States congress. I would like to divert your attention to the graph showing how the Congressional Budget Office lowered its assessment of the economies output potential throughar since 2007 2016. These are not projections of actual gdp, minor, but the economies output capacity normally a fairly stable constand. Back in 2007, the cbo estimated u. S. Output had potential for tray 16 to be over 12 higher than it actually is now. What happened . The aging of the population was predictable. Not anticipated was that u. S. Business would be down and the rate americans would be participating in that market in the labor force would be dropping so markedly. The Labor Market Health has not been fully restored. Of the Labor Force Participation of people of time working injury means substantially below where it was prior to the recession. Believe that economic policy, including the failure to act when other countries were improving their Business Climate is largely to blame. I would like to show you two graphs that illustrate the faceu. S. Firms chase on an international playing field. The first shows how 34 countries changed their protectorate 2000. All these countries, save chile, which have the lowest rate initially, reduce the corporate rates to make their economies were competitive while the United States rate remained the same. The next chart shows how 27 countries is Product Market regulations from 1998 to 2013. Ased on oecd index all these countries, save chile, reduced their taxes and reduced their regulations. This paints a certain picture and explains why u. S. Corporations have been moving offshore. Other countries have have purposely improve their International Competitiveness of the business sector while the United States has taken for granted the competitiveness of its businesses. As a result, we have an economy that does not fully engages resources and entrepreneurial spirit. A hearing earlier this year on declining Economic Opportunity revealed a dramatic decline in this country since the last recession. From 2008 to 2014, more businesses actually closed than opened. The hearing earlier this month showed how detrimental the tax code can be to starting a new business. In terms of both his provisions and shear complexity. As the challenges we face are more daunting as a result, the National Debt is a bigger problem with a slow growing economy. That is why we so urgently lead both tax and Regulatory Reform. E we must restore a more highly functioning market economy that offers hope and opportunity to investors, to entrepreneurs and workers and that removes the artificial constraints on a fast faster Economic Growth model. The expertise is well grounded in Economic Research in one of his areas of specialization, which is especially useful at this time. I cant think of a better witness to explain to us just how taxes and Regulatory Reform can lift the economy and Living Standards across our country. I will now yield to our Ranking Member senator peters for his statement today. I want to thank the chairman for your priding over this hearing. And also want to wish you well in your future endeavors. I was sorry to hear the news. We are certainly going to miss you hear in congress, but we congress, but we know youre going to enjoy new challenges and have a little more time to acquaint yourself with the family, which is always a wonderful thing. Mr. Chairman, i think this is a very timely hearing given ongoing push by the majority and the white house to enact tax legislation on an aggressive time line. Before we get into specifics of tax policy, i would like to take a step back and take a broader look at the state of our economy and the Economic Outlook for the coming years. They have not shied away from highlighting some positive statistics unemployment e remains low. Theres more to an economy than raw job numbers or the dow average. For working michigan families, we still see stagnation in wages. Americans are still not seeing the growth in wages that normally a Company Economic recoveries. Not only do stagnant wages have an Immediate Impact on the daytoday lives of american families, it was contributing to another troubling Economic Trend and thats growing Retirement Savings crisis. Far too Many Americans dont have the resources for a living retirement. I believe this will have a serious consequence for our entire economy. When it comes to middle class american families, the state of the economy is mixed. For policymakers, i believe there are other trends we must address to ensure health for the American Economy in the decades to come and see the type of growth necessary. First, i believe it is of the utmost importance that congress reject the idea that deferring or for some eliminating invest ment in basic science and research has no consequences. It does. It has significant negative consequences. A lack of commitment of Funding Research that will lead to the next generation breakthroughs will have a devastating impact on our economy. And i can promise you our competitors including china will not simply standstill and see the competitive advantage in innovation. Second, we must reverse an alarming trend of declining new second, we must reverse an alarming trend of declining new business formation. New businesses are the driver of our economy and are responsible for most new job creation in the United States. But alarmingly, we are not seeing the numbers of new businesses needed to increase the shared prosperity across the economic spectrum at especially in the urban rural divide. New business formations across the president ial administrations in both parties has fallen by half since the late 1970s, and when new businesses are created, they are increasingly concentrated in just a few metropolitan areas like los angeles in new york. And finally, i believe perhaps the critical question of poll of policymakers must be asking about the future of the economy is, how are we going to prepare our workforce for an increasingly autonomous world and Machine Learning . I think it is stagnant wages, massive Retirement Savings gap, a retreat from investment and innovation decreasing business , formation except for a few metropolitan areas, and fundamental shift towards automation that could dwarf the Industrial Revolution in global impact. These are problems we can Work Together to solve on a bipartisan basis, and i think we must do this on a bipartisan basis. Unfortunately, im concerneded that we are going to be spending the coming weeks and months debating just how big a Corporate Tax cut to multinational conglomerates should receive and other policies that clearly benefit the very few and most wealthy individuals while raising taxes for middle class americans. Despite our differences, i look forward to a serious conversation today and hope we can find Common Ground on how to meaningfully support American Workers and their families. Thank you for being here today. , thank you, mr. Peters senator peters, and we now turn to our distinguished guest, and i apologize we have a may make ways and means we have a ways and means republican meeting going on. I will be departing before the hearing is over to join them, but we are here today. The senate has a vote at 10 30. Sorry for the interruption as well. Let me entering introduced dr. Hasek. He worked as a scholar at the American Enterprise institute. He served as Economic Advisor to george w. Bush, john mccain and mitt romney president ial campaigns. Dr. Hassett was also a senior economist and associate professor at columbia university. He earned his doctorate in economics from the university of pennsylvania. Its an honor to have you today. Youre now recognized for your testimony. Thank you, chairman tiberi. What an honor it is to be back before the committee with the word honorable before my name, which seems really inappropriate, but i am so thankful for the support of senator leahy and senator the heaters senator peters and my confirmation of the senate. Its great to be back. The joint Economic Committee has a proud tradition of focusing on the problems facing america and the solutions that we can agree to on a bipartisan basis. It is in that spirit that i appear before you today. In the testimony that follows, i will provide an overview and discuss the status of a number of sectors. I will emphasize some areas that need attention as well as recommended policy changes that will improve our citizens economic wellbeing. It you read the 46 employment act that created the council, thats my somber responsibility, is to analyze the economy see , whats going on and provide the president and congress with objective advice about what we ought to do about it when we are probably sure. The economy is believed and growing at a solid pace with low unemployment and low inflation. Financial markets appear to recognize the likelihood of continued growth with low inflation with a major stock price the major stock indices up over the past year and with expected inflation from the market for treasury protected securities remaining low. That said the Trump Administration is not satisfied with business as usual, nor with the pace of real output and Income Growth during the past several years. As a result, we have put forward a program to boost the rate of real gdp growth. After reports the economy is , doing well so far in 2017, growth averaged 2. 1 at an annual rate. Real Consumer Spending grew 2. 6 . 2. 9 slightly below the rate of growth in the preceding two years. But this is investment grew at a 7 during the first half of 2017 and that is a notable acceleration from essentially a flat pace during the proceeding two years. That is very important because after translating this pattern of investment into the flow of Capital Services, its apparent that deepening, the flow of Capital Services services per hour worked, has made no contribution to the growth of productivity in recent years. In contrast to postworld war ii average of 8 per year. Indeed if you look at the contribution to productivity growth deepening over the last two years, it became negative for the First Time Since the second world war. Ill discuss in a moment this administration thinks that tax policy could play a role in reviving the contribution of Capital Services to Labor Productivity growth and most importantly through that channel to the growth of real wages. Before i do that, lets look at a few other sectors. Real residential investment grew at a slow 1. 5 rate in 2017. The slow rate of core inflation is notable. For including food and Energy Prices was 1. 7 for the months through september. Looking back at the past few years, it appears that real potential gdp appears to be growing at a 2 annual rate or even less as that chart indicated, and real wage growth in america has stagnated. Over the past eight years, the real Household Income rose by an average of 6 per year. The relationship between Worker Compensation broke down in the late 1980s before any of the recent policy had a chance to interrupt that. That deteriorating relationship between the wages of American Workers and u. S. Corporate profits reflects the state of International Tax competition more than anything. Countries around the world, and as the chart as indicated have , responded to the outflow of capital by cutting the Corporate Tax rates. A key feature for taxes of this administration together with congressional leadership is the proposed reduction of 35 ral tax rate from 25 to 25 . This conclusion that the incidents of the Corporate Tax falls partly on workers and driven by patterns highly visible in Extensive Research not to mention a number of followup studies that appeared in the last 10 days or so. The real variation between real wage growth and the Corporate Tax rate between the most tax countries and least taxed countries is figure one over there. It is indicative of this larger literature. Simple correlations do not tell the whole story, but there is a big literature to show low wage growth, low Corporate Tax countries have high wage growth. 2012 and 2016, the lowest tax countries in the oecd that is about the same scale as the reduction currently under consideration here in the United States. The average real wage growth in those countries has been dramatically higher. This has been predicted by the academic literature. The economy has made great progress reducing the jobless rate, but the rate of growth has been slow. It is time for all of us in a bipartisan way to turn our attention to building a plan or boosting the rate of growth and wage growth in particular. As i have discussed the administrations plan for tax reform will have an Important Role in improving productivity growth in combination with the plan to stabilize the environment, and we look forward to working with you, the members of this committee, to help us reach those goals. I will have happy to respond. Rep. Tiberi thank you. Thank you dr. Hassett. , over the past decade, the cbo has continually downgraded its estimate of what the economy is capable of producing. Our output potential. Is it possible in your opinion that the obama era policies of higher taxes and heavier regulation actually constrained our economic potential and how could we change that . Mr. Hassett i think on the regulation, it is certainly possible. I think your chart really captured what happened in recent years, which is that it is not our actions on tax policy that necessarily harmed us. Its our inactions. So what happened is the rest of the world cut their Corporate Taxes, and that made their countries much more attractive for the multinational people in our country. We saw that move overseas in response to that. To think about how big the effect is that theres a National Bureau of Economic Research paper that came out in the spring that looked at the u. S. Multinationals. They priced their transfer of a broad and the profits abroad were too much of the products that say they buy from the irish plants. And this is a study that 52 of our trade deficit right now is coming about because of the transfer pricing. We are paying for too much from stuff, moving that much activity offshore. So much activity that 52 of the trade deficit is attributable to it. That means lower demand for workers and lower wages as well. Rep. Tiberi thank you. You have written and spoken in recent years on the challenges of uneven economic recovery. We have explored in this committee a topic that senator peters mentioned as well. Indeed a wide array of research , makes clear that this recovery has been the most geographically concentrated on record, leaving far too many communities like in ohio and michigan for example behind, immunities and the people that live in those communities behind. As you know i have introduced legislation to provide a new marketdriven way of giving private capital off the sidelines and into our communities to foster new business and create jobs called the investing in opportunity act, which is garnered by bipartisan support and bicameral support. Senator tim scott is the lead sponsor in the senate. Two questions for you. Can you briefly describe first, the measures and consequences of this trend thats occurring within our economy of increasingly concentrated job growth in places like los angeles and new york . And secondly can you speak to the administrations commitment to tax reform ensures the challenge head on of incorporating ideas like investing in opportunity act . Mr. Hassett thank you, chairman. The geographic inequality has been focus of my work for many years. Its really the reason im an economist. I mentioned in my confirmation hearing i grew up in a town where the green field was the main factory in town closed. Across the way, there was a big paper mill that was the main employer and that closed too. My dad and i, we walk next to the abandoned factories because they are on the connecticut river. It is a beautiful walk, but the factories are so fallen apart that the videogame fallout used it as a location for video shooting for post apocalyptic america. This is something i care desperately about. That is why my academic career has really focus a lot on geographic inequality, including as you mentioned the states like ohio and michigan where the plants closed and the jobs havent come back. I think that tax reform in general definitely encourage a lot of plant location back into the u. S. Because right now if you locate in ireland, youre almost paying no tax. In the u. S. We are paying the highest tax of the developed world, but we should also pay close attention to where those plants are going to go. As you said, if the plants were to locate in the places that have very low Unemployment Rates right now, they wont be be necessarily be helping those distressed communities. The administration doesnt have an official position yet. Its not something i have discussed with the president on your specific proposal. But i can tell you that the geographic inequality is something that everybody is paying very close attention to. Senator peters, you are recognized for five minutes. Senator peters thank you, mr. Chairman. Mr. Hassett, you have certainly been engaged in a high profile debate of sorts over the impact of the administrationstax administrations tax proposal. What it will have on wages for working americans, and i think there is certainly an awful lot to dive into regarding that argument. But to be brief and somewhat skeptical, i think im in pretty good company that i think a majority of economists are skeptical in some of the numbers we have heard from the administration. So i believe that many working families back home in michigan are also very skeptical about that. But for them, i dont think many michiganders are holding their breath to see iftheir bosss bosss boss tax cut trickles down to them to see either in increased growth or in wage increase. Instead they want to know how this tax proposal is going to impact them. How its going to impact their pocketbook. They certainly have to worry about everyday challenges about buying a car and paying for daycare and providing for a secure retirement. So i think we need the administration to be a little bit more direct as to the consequences of the tax plan that is before us. Specifically as it is tailored to individual, so folks know exactly what this means for them. Certainly some estimates have shown that some middleclass families could see an 800 increase because its focused primarily on the folks at the very top of the income scale and large corporations. They will be paying for it in the form of higher taxes. So i think we need to make sure the American Public and families know what that is. And given the fact that the Median Income for families in michigan is a little over 52,000, an 800 tax increase is a big deal for those families. And we need to have full disclosure in this plan going forward. So i understand you may find some disagreement with some of these estimates that are being put out by various economists and other types of think tanks, but could you give this committee today an estimate of the tax savings that a working family will get as a result of the tax plan that has been proposed . Mr. Hassett yes, thank you, senator. You know, i know the first part of your question will cut to the tax savings discussion so sorry to interrupt. Can you move a little closer to the mic . Mr. Hassett yes. Lets talk about what we agree about. In the cea report that we just put out, we found that theres been a disconnect between the welfare of corporations and the welfare of workers. Corporate profits are soaring, but wages are not. Yes thats unusual in u. S. History. I think we agree that disconnect has happened. I think we also agree were the highest Corporate Tax place in the developed world. Thats a simple fact. And so i think the other thing we agree about is the fact that capital deepening contribution to productivity growth in the u. S. Has gone to the lowest level it has been since world war ii. So i think that it behooves all somberit is our really responsibility, what is driving these factors, the best explanation for those patterns of data is that the corporate rates have gone down a lot. That they have encouraged u. S. Multinationals to locate plants there instead of here, and that is why we see everything that we do. I know if labor demand goes up, wages will go up, and there is a dispute about how much. I dont think anybody thinks it is now as for the estimate of zero. The tax effects, as you know the administration is committed to a process that hopefully could be bipartisan. The committees are working out where the brackets go, and the president has even mentioned we are open to a higher top rate if that is where it takes. And i think this process is designed optimally to increase bipartisan working. Everyone is hoping we go there. If i were to say, this will get this tax cut, i would step in front of that process. Where the brackets are located is being negotiated in the ways and Means Committee upstairs and in the finance committee right at this moment. Rep. Tiberi you are going to be important in that process. You are the principal advisor to the administration as to where this policy should be and how its going to impact growth. I want to pursue that just a little bit. We do agree on the disconnect between corporate profits and wage levels for most workers in those companies. In fact corporate profits are at an alltime high. So it is not the corporations are hurting right now, but we see certain individuals have benefitted. First and foremost, we know ceos have done very well. As a matter of fact i think ceo pay has grown about 90 times faster than the typical worker since 1978. So the folks at the very top are reaping all of the rewards of that growth. It is not impacting everyday americans. And we have a tax proposal thats going to say those folks who are reaping all of those benefits, they need to pay less taxes. I dont think the average worker thinks that is the case. I think they need that kind of relief. As were talking about the particulars of an individual family, i want to know, and we have heard President Trump say that middleclass families will not see a tax increase is at the is that the position of the administration, and when you use that influence that you have with the president and the president stands by those comments to the ways and Means Committee to see middle income taxpayers will not see a tax increase . Mr. Hassett the president is adamant on that point. Its the one thing thats nongauchable. Theres not going to be a middle class tax hike in this tax bill. As for the corporate profit point i know we are running late, but i hope i could respond to that too because it is a very important point. Right now, u. S. Multinational profits are at an alltime high. And executive compensation is skyrocketing. The last i checked, i could follow up on this executive , confirmation was higher than dividends. Go figure. But the disconnect from wages is not because there has been a fundamental change in market power. The disconnect in wages occurs because the profits are not in the u. S. The profits are over there. And so right now we have the highest tax on earth, but those companies are not paying it because they are locating the revenue in ireland. So if we make our country more attractive for the location of plants, then it is not that were giving a big tax cut to companies not paying. Its just that they are not paying the tax because they are locating the activity over there, and the profits that are sky high in the u. S. Are driving up wages in places like ireland. Sen. Peter if i may briefly, because i want to make sure i am clear about taxes for middle income families. Because some of the numbers i have seen particularly with the elimination, for example, of state and local deductions for state and local taxes there have , been a number of studies that show that request that elimination, a lot of families are going to see an increase. About 12 or 26 of families in michigan claim it is all over the country. Some have said it could be up to 1800 a year because of the loss of that deduction. And i think you will see a number of those figures. So given what you have said i , hope youll understand when those of us are pushing back on a proposal that may be put before us, we are going to say we cant support that and hope , well be aligned with the president that we cant support these increases on middle class families. And we will push back aggressively on the republican proposal. Mr. Hassett thats understandable. When the complete plan is available, i look forward to working through those numbers with you and your staff. Sen. Peter thank you. Rep. Tiberi dr. Hassett, we are grateful to have you here. Congratulations on your confirmation. We look forward to having you at your new role at cei. Cea. We are in the middle of a debate that has been made clear this morning in our discussion. I want to pick up on something senator peters was discussing peters was discussing. Having to do with our Corporate Tax rate. At 35 we have the highest Corporate Tax rate in the world, and there are problems, problems that i think are acknowledged by most republicans and most democrats, but sometimes i dont think we look into it quite enough. Sometimes we look at the Corporate Tax as being something that is paid, a burden that is borne solely by wealthy corporate fat cats, the likes of whom could be depicted with a Monopoly Game piece or like mr. Peanut with the doublebreasted suit. But when you take a close look at who pays Corporate Taxes, the picture is a little different. It, it taxes effectively both capital and labor, both the investors dividends and wages of the workers. Economists disagree how this breaks down, but it is understood that lost worker wages make up between one quarter and onehalf of Corporate Tax revenue. Some put the figure higher than that. And so perhaps a quarter to a borne bybe more, workers. You have everything that people by every good, every service in , the economy is made more expensive by a tax like that, and theres also diminished wages and unemployment and underemployment that can sometimes stem from that. So in the end i tend to view this 35 Corporate Tax as having some very nasty regressive effects meaning that its least , desirable qualities include the fact its borne disproportionately by americas poor and middle class. This is why in january i penned an oped that eliminates the Corporate Tax altogether and shifting that particular tax burden on to investors instead of workers by taxing Capital Gains and dividends and ordinary income rates instead of having at ordinary income rates instead of having the Corporate Tax. Under this type ofstrategy, workers would be liberated from their share of the Corporate Tax burden. And america would without a doubt become the most popular place in the world to do business. So dr. Hassett id love to get , your comments or thoughts on that idea. Mr. Hassett thank you, vice chairman lee. I think that again wage growth , is low, Profit Growth is high. The profits are over there. We have got the highest rate, and we see that countries around the world that are run by governments that you know dont have the commitment to the american system that every member of both parties here in congress has cutting their corporate rates. President macron ran in france on reducing the corporate rate to 25 , and the french rate was already below hours as that election began. The greek government that translates their party title into the coalition to the far left, they have a lower Corporate Tax rate than us. This is not about a right wing parties throwing money at rich corporations. It is about economically literate governments understanding if we want wages to be higher, then we have to give workers capital to work with. And if you look at the u. S. Right now again, the contribution to productivity growth from capital deepening is lower than its been since the second world war. We have got a crisis in our country. Its something that everybody on this committee needs to Work Together to solve. Sen. Lee and this idea of zeroing out the Corporate Tax altogether and replacing it with a tax on dividends and Capital Gains would put it on par with the taxes we impose on income what do you think of that idea , specifically . Mr. Hassett you know, im focused like a laser right now on the proposals that are there. Your idea is something that is quite analogous to what a lot of other countries have done. A few countries have eliminated it altogether. But many have integrated the Corporate Tax with the dividend and the Capital Gains tax so that they are basically charging tax once at one level, but in a progressive manner. If you throw the individual side, then if theres a retiree getting a dividend, they are using that dividend to pay their utility bill, maybe you dont want to tax the heck out of that dividend, but maybe if there is a rich person getting a dividend maybe you do. , those are the arguments that have motivated other countries to do that. For me right now, im focused on the current proposal. Sen. Lee theres another issue that is closely related to this one that deals with the burden of overregulation. I keep two stacks of documents in my office here in washington. One stack is a few inches tall. It is a few pages long. Thousand the law is passed by Congress Last year. The other stack is 13 feet tall. Last year it was 96,000 pages long and is the annual rest are register, federal simulations as they are released, and it is accumulations as they are released and is later finalized. It came down to 2 trillion a year. This is up from just 300 billion a year 20 years ago when i first started tracking this problem. Its increased seven fold. Its the product really of congressional delegation of power. Congress not wanting to make law itself and stand accountable for the difficult line drawing decisions that go along with setting Public Policy and having someone else do it. And yet, its costing the economy 2 trillion a year and i believe those effects are borne by americas poor and middle class. In your opinion, do you think an idea like the regulatory budgeting idea proposed or the reins act which would require congressional approval of major regulations would have a desirable impact on gdp and benefits for americas poor and middle class . Mr. Hassett thank you, senator. In terms of the specific proposals i would have to touch base with my colleagues at the white house. It is not something i have discussed with them, and i would not wish to signal official White House Position that im not informed about. But certainly the topics that you mention are incredibly important to the white house. And i think that one reason why sentiment in the u. S. Is so much higher right now is that theres been a lot of palpable deregulation so far this year. But also almost a halt of costly new regulations. And one of the things that we at cea have been studying is the impact on firms of new regulations. It is really quite striking because if you run a business then all of a sudden the u. S. Government has a new regulation, you have got to hire lawyers. You have to figure out what to do. Decide whether to put new things into your plan. Its an urgent problem. The regulation from three years ago has cost too because its distorted your previous behavior. But the new regulations are costly and. One think tank in town has estimated that because we have slowed new regulations, that we have reduced the amount of manhours spent this year by more than 6 million man hours. That gives you an idea of the kind of effects of Regulatory Reform. But we are also very mindful, as a final thing, of how important regulations are for clean air and water. We are not talking about wiping away all regulations, but exposing the ones that exist and doing careful costbenefit analysis. Sen. Lee my time is expired. Esther delaney. Delaney thank you, dr. Hassett and congratulations on , your appointment. You bring tremendous expertise and good judgment to this important job so its great to have you in the seat. Just staying on the Corporate Tax question for a moment, it seems to me that across the last decade or two, a very large percentage of businesses, particularly large businesses, have moved from an incorporated status to a passthrough status because of the way private equity has grown and the back companiesn and those that move to llc status. Many of them pay little tax because they are leveraged and they deduct the interest. Theres no evidence that i have seen to indicate that wages have grown any faster in those companies where theres no Corporate Tax than in incorporated businesses in this country. Does that, to some extept, extent mitigate this argument , that the Corporate Tax rate is the reason that wages havent grown in this country . Because in fact a growing and large percentage of these dont pay tax because of what i just discussed. Their wages have not grown any faster based on analysis done in wages and c corporations, which actually pay this tax. Mr. Hassett thank you for the question, mr. Delaney. It has always been an interesting question. Im not sure theres literature its an interesting question. Its a really great question. Effect is there, i will not dispute or concede laborforget the u. S. Market is a place where firms show up and compete for workers , ideally. And the wages set by total labor demand in the country if we have a big chunk of the firms in the country locating the jobs overseas, that reduces overall demand. But in the end, if comstock incorporated is competing with delaney, were going to have to pay about the same wage. And a quick point. The average corporate rate is 23 or 24 . Is that about right . If you mean the taxes divided by total revenues at the average rate, the last i checked for multinationals, it was a good deal lower than that. Got it. Is that more consistent with our competitors, as opposed to the stated rate, which is the highest . Mr. Hassett if the revenue is low with our high tax rate because people locate activity offshore, it doesnt mean we have a low tax rate. It means youre referring it. So, i loved how you talked about focusing on things we agree on, because we need to do more of that. Focus on the things we dont agree on. Two things that theres broad agreement on. I think the tax reform, which i worked on extensively as i think you know around International Tax reform, it seems to me its a missed opportunity not to do infrastructure because its the only way to pay for infrastructure and everyone seems to agree we need more infrastructure. The second question is a carbon tax, which would generate an enormous amount of revenues which could be used for broad base tax reduction. Under the at category of tax pollution opposed to income and profits. Can you comment on the wisdom of having infrastructure as part of tax reform and perhaps a carbon tax as part of tax reform . Mr. Hassett sure. First, im an economist and if i look back at the times i have worked on president ial campaigns and advised people, they tended to lose. So, i dont give political advice whether they go together is something you are the experts in. What is your directional opinion carbon tax . Yes, a carbon tax is writteng i have extensively about. My job is to provide information on proposals. Im sure i would be citing some of that work. What is your directional opinion on a carbon tax . Whether a carbon tax whose revenues would be effectively dividended back to the American American people, either directly or through tax cuts . How would that affect Economic Growth . Putting aside what i view as perhaps the most important benefit to reduce greenhouse gases. How would you view, as an economist, how that relates to Economic Growth . Mr. Hassett there is an economist at the resources for the future and the university of maryland named rob williams who has done a very careful job. Depending on the tax rates, you can either get really a negative effect on the economy or not so big small positive effects. His model, thats what it says. Thank you. Thank you. I recognize myself for five minutes. Thank you. Good to be with you, chairman. And welcome you here to this committee and to your new position here. I wanted to follow up a little bit on growth rates. As we look at growth in what were doing in taxes and how that relates to our international competition, and the potential for growth in economies you know when you , look at india and the growing middle class there and the potential we have to benefit from that, whether it is trade or also growing competition that we are going to have. Were the best policies in terms of getting our growth rate up . Because when you go to other countries and hear they are having 8 or 9 , when i look at a lot of the potential im in , virginia with a lot of Technology Sector in my district and i hear fromthem about they i hear from them about they are just sort of waiting whether they can invest here or invest somewhere else. Should i go to india, should i go somewhere . What policies can we put in place to unleash it to grow here , but then interact with the growing economy around the world. Around the world . Mr. Hassett i think there are three components to Economic Growth to grow output, you need to grow inputs. You can have more labor input because workers are more talented. You can have more capital because we are an attractive place for the location. When you look around the world and see countries that growing at 9 or 15 sometimes, very often that happens sometimes because they are starting out from a a place where they are not at the technological frontier so they can skyrocket , growth because they are going well. Y it as the problem for us being really the class of the world in terms of technological frontier or close to it is that the sort of innovation part of growth is a lot harder because we cant copy what somebody else is doing. We have to innovate and discover something that no one ever knew existed. But we could also things we can correct with policy and we can effect labor supply and capital supply. I think that the tax reform that has been negotiated with the white house and congress is designed optimally to help both on the individual side by reducing tax rates at higher labor supply and the corporate side by making the u. S. A place where plants want to locate again. We should increase Capital Formations as well. Representative comstock i know thats an issue that well be dealing with also. How can we invest in workers and grow so with the information economy with this expanding economy and middle class around the world, our workers, if were going to continue to lead need talented and we need to continually invest. We talk about lifelong education. What policies can we put in place so we upgrade our employees so their wages are growing substantially and we do not have the stagnation we have well, sure,sett one key factor is Human Capital formation and educating workers and helping them keep up with the rapid technological changes in society. There are a number of initiatives that arebeing studied and enacted now by secretary devos and the rest of the team on the education team. One of the things, looking back at our policy failures as a nation over the next few years , we have not necessarily done a good job of that. If you look the at the people that receive training because they lost their job because of trade and the training might not be that helpful. That is something we need to study and improve upon. Representative comstock in terms of having to look at all these training programming we training, programming, we have job shortages. In virginia we have lots of , cyber jobs open. We have programs, and i will give a plug for capital 1 they have some great outreach with communities where kids arent going to college. But they will get them in. They have gone out and recruited kids. Lower income areas, but with real potential, bring them in sixmonth a year program and they are having huge success getting them into that cyber pipeline. If they want to go back to business school, back to college, they now have a job where also will get Tuition Assistance and things like that. So maybe as were looking at training programs, but also tax policy how can we encourage companies to invest in their workers like that and match education efforts to the jobs that are open and that we are discussion in filling . Mr. Hassett that is certainly an important objective. Comstock thank you. Thank you. I will not yield to my colleague mrs. Maloney. Thank you. Thank you. Now in the words of a famous and immortal new yorker, yogi berra, this topic sounds like deja vu. This country has heard again and again about how huge tax cuts for the most fortunate have to trickle down to benefit working families and again and again that has not been the case. Just last april, this committee had a hearing where we debated the virtues of trickle down economics and featured the inventor of the curve and dr. Jared bernstein who was the chief economist to former Vice President joe biden. He made a number of the same claims being made here today about the giant tax cuts. And after the hearing, he published a number of articles that pointed out that that is not what happened. And id like its not likely to happen again, i would say, based on the past performance. So without objection, i would like to submit copies of these articles into the record. Now, according to your prepared testimony, you estimate that the administrations proposed tax cut to the Corporate Tax rate would increase the level of average Household Income in the United States by at least 4,000 annually after the effects have taken place. That is on page four of your testimony. Correct. Correct. Representative maloney i must say that sounds absolutely wonderful, but it sounds a little bit to me like you can lose all this weight and you dont have to exercise or go on a diet. Past performance doesnt show that. The New York Times pointed out in one of their articles that a 2012 Treasury Department study found that less than a fifth of the Corporate Tax falls on workers. So its not this trickle down to them. A congressional recertainly a Congressional Research report last month concluded that the effects of Corporate Taxes fell largely on high income americans, not average workers. So id like to, without objection to place into the record these two reports also. Without objection . Without objection. Representative maloney thank you. Now factcheck. Org, you may have seen the report that they did on your numbers. They also took a look at the underlying mathand found there were roughly 125 million households in the u. S. Last year and an average increase of 4,000 of each of these households would equal more than 503 billion annually. But according to the u. S. Treasury the total amount that u. S. Collected in Corporate Taxes in fiscal year 2017 was just 297 billion. So even if you somehow transferred all the money previously collected in Corporate Taxes directly to american households, youd still be about 200 billion short. And that doesnt add up to me. So to support the administrations proposal, you further testified today and you give the example in your testimony that between 2012 and 2016, the ten lowest Corporate Tax countries of the o. E. C. D. Had a Corporate Tax rate 13. 9 Percentage Points lower than the ten highest Corporate Tax countries, about the same scale as the reduction currently under consideration in the United States. But you dont list those countries. I assume they must include low tax countries like switzerland and latvia. Id like you for the record to submit who these countries are. I looked at latvia and its a great country. They have emerged in a noble fashioned from communism and soviet oppression. But last year the gdp of latvia billion and that is , not quite as good at vermont. Vermont came in at number 50 in gdp among our states. So, our users the suggesting that the u. S. , a country with huge, complex, dynamic economies and a gdp last year of over 18 , trillion can and should model its tax policy after that of an Eastern European country still the oak ofom communism . Actually switzerland also has a very low tax rate with a gdp that is less than that of vermont . If i can use latvia as a model, then we should also use the say, ofxample, i would kansas as a cautionary tale, a tale about the economic chaos that happened if your brand of trickle down economics is put into place. Kansas is not a pretty picture. So your comment really on the 10 compared to the ten highest to me, it doesnt make a normal or accurate comparison and the numbers that were really refuted by factcheck. Org on the 4,000 benefit. One of the items thatsenator one of the items that senator peters mentioned is the concern that many of us have that outside organizations and analysis are saying that 80 of the tax cut goes to the most fortunate, which is not the stated claim or purpose or goal of the administration. But in its current form, numbers dont lie. The numbers are coming in in a way that does not benefit the working man and woman in our country. Mr. Hassett thank you very much. Its always a pleasure to appear before you. Representative maloney always a pleasure to see you. Congratulations. Mr. Hassett ill respond directly. The point about latvia, there is a large literature that looks at Corporate Tax change and how wages respond. Theres variation over time within countries. Theres variation across countries. Representative maloney excuse me a second. But when you make a presentation, if you could give us the ten countries that youre looking at. I will follow up and send them. I cant think of them off the top of my head, in part because it changes each year. Because people are cutting their taxes. But this evidence has been found in people looking across u. S. States you mention vermont theres a Federal Reserve paper that states what happens when states change their Corporate Taxes, what happens to wages . Canada, germany. So, the chart was meant to summarize what is basically a result that appears over and over in the literature. I think the factcheck. Org point which has been emphasized also publicly by a few economists is really something of a classic economic blunder. The fact is that if right now we have a Corporate Tax system that encourages firms to locate their activity in ireland in order to avoid u. S. Tax and they do that by creating jobs in ireland instead of here, then were barely getting any revenue at all from the Corporate Tax here. I think we have kind of agree that u. S. Multinationals are not paying that tax. So to look at the change in revenue and wages, to say thats a meaningful ratio is something thats been disproven by careful analysis by john cochran, casey so, the factcheck. Org numbers are just not correct. Thank you. Representative maloney well, if youd send me the reports that you mentioned and i will send you the Treasury Department report and the Congressional Research service. Mr. Hassett id read both of those. Representative maloney that refute that. As we go forward in this debate, its important that we get our numbers straight. And i would like to see the numbers that you projected with the foreign countries. And this is important. Id like to see the money brought back to america and invested in our economy and infrastructure. I agree with you on that. And this is a work in progress. We do need to simplify our tax code but we certainly need to do it in away that is fair to working men and women. And i do not believethat the current form thats before us of course its going to be debated and changed as we go forward, as you pointed out. Thank you so much for your service. I guess i yield to senator lee, right . Thank you very much. Senator klobuchar. Klobuchar thank you so much for being here. I would share the representatives concern about the currentproposal. But i wanted to start off with something youve done some work in rural economic area. Last year we saw a large layoffs still iron range due to dumping. People are just getting back to work. We have housing issues because andave Successful Companies we have job openings, but not in trained workers and i know you have been asked about this. You have written about the challenges acing our rural communities. What policies or programs you think we should implement to help . Thank you, senator. For myu for your support nomination. I am very humbled by it im very grateful for that and humbled by it. I think that the geographic inequality around our country right now is very palpable in many different ways. There are places that are booming. At the state level, colorado has about half an unemployed worker perjob listing. If you survey firms, the biggest problem they have is they cant find the workers for the job openings they have. And as you know, there are parts of every state that exactly theopposite circumstance where the Unemployment Rate is north like and doesnt seem its budging, even if the economy is doing great. As an economist im hopeful that , the current taxfortunately thats currently being considered would do quite a bit to help that. With a tight laybor market, if youre a firm anduntyou want to locate here instead of ireland, then you want to locate to a place with a lot of workers. I think that big picture effect is probably the biggest thing that we can do. Earlier we talked about a proposal which the white house has no current position on about how to address geographic inequality more specifically with a bipartisan proposal that mr. Teaberry is a cochair of. Mr. Teaberry is a cochair of. Senator klobuchar you mentioned the tax, other countries locating overseas. Certainly one of the biggest goals we have here is to have jobs in america. I was just talking before i came over here with some tax experts about the difference between someone who would like to bring the money back from overseas, the global tax idea where you have the average countries versus the previousadministration had a territorial tax idea where Previous Administration a proposed a territorial tax idea where you would have a minimum tax per country as opposed to having this average. And what would the average do . Could you talk aboutthe difference between those two proposals . Im not talking about the specific rates. Im talking about the mechanics of how they would work. Mr. Hassett i know this issue is currently being studied carefully by the committees. Everybody involved to has studied it, including president obama thinks we should , move towards a territorial system. The sort of frustrating part for people who do taxes, there isnt really just a territorial system and a world wide system, but theres degrees of territoriality and world wide. I look forward to seeing what the committee has come up specifically on this issue. I think its a very important one for understanding the International Implications of the Corporate Tax. But i think we have to let the committees decide where theyre going to go with that. Senator klobuchar ok, the last question i have is on the Economic Opportunities that we could have with Immigration Reform. Governor norquist came in and gave his full throated support for Immigration Reform with the bases we could bring down the debt, and there have been many cbo studies on that, and also that we could actually bring in more talent and create more jobs. And i think the 2013 figure back then would reduce the deficit by 158 billion over ten years. 25 of our u. S. Nobel lawyer yetureates were born in other countries. Could you tell me where you are on this . Mr. Hassett sure. I think that as an economist we talked earlier in the hearing about if you want more output, he need more input. And one of the inputs is labor. In any economy, immigration is an important source of labor. And also we have borders and they need to be protected. Im not an expert on border security. Senator klobuchar we had a bill like this out of the senate that did both things. We had significant funding for the border but also allowed this kind of Legal Immigration im talking about. Mr. Hassett id be happy to discuss that specific bill with you. Senator klobuchar very good. Time is of the essence here. Weve been waiting a decade. Im thankful my irish ancestors came here and im pretty sure it wasnt because they had computer degrees. Senator klobuchar same with mine. Mine was a chef. A chefs assistant, not a chef. Mr. Chairman, reports out of the recent fourth round of the nafta renegotiations have not been positive, particularly regarding the interactions in reactions in auto and mexico city. The successful conclusion of the negotiation was going going tobe to be difficult. Now we seem to be further away from that goal than ever before. If those renegotiations do not produce an outcome thats acceptable to the administration or the congress, with the economy be better off if the nafta ratherof , than the status quo . Mr. Hassett thank you for the question. You know, i am not involved in the negotiations and i think that the president s position on trade is that our trade deals can be made better. I think that as aneconomist i i think that as an economist i could say that if an economist wrote a freetrade deal, it would be one sentence. It would say weve got free trade. If you look at the free trade deals, theyve got thousands and thousands of pages. I dont think one could dispute the observation that we can make those deals better. Im hopeful to see where the negotiations lead and hope that the trade deals will be made better. Im glad to hear implicit in your remarks is that youre very much a free trader. Im an economist. Yeah. I put those together. Youve written in the past about the stock market. Based on public statements by senior administration, including our treasury secretary described it as market to market basis. Participants see the higher stock prices as a validation of these policies. But as you know stock prices go , up and down. What are the risks, in your view of guiding policy based on the , whims of the equity markets . Mr. Hassett i dont think theres anyone that i know of in the white house whos guiding policy based on what happened yesterday in the stock market. I think our economic proposals are based on sound economic reasoning and objective analysis. I think youre right that the market has gone up and down. And the market has gone up a lot lately. And i think probably there are a couple of reasons why. The most important would be theres anticipated tax reform. If the corporate statutory rate were to drop as significantly as proposed, that would certainly have apositive impact on the market. So exactly how big that effect is and what the probability is that the markets factored into the tax reform is unclear to me. Theres not really a good estimate of that. But i think one could be quite confident if the tax reform were to fail, that would be a big negative for the market. Several fed president s have recently noted that cutting tax at this point in the Business Cycle would be highly pro pro cyclical. Robert kaplan said my concern is you would create a bump ingdp bump in Gross Domestic Product that would be shortterm. We declined that back down with trend growth youd be more , leveraged than when you started. San francisco fed president John Williams said, a less targeted to rise productivity and underlying potential, a tax cut could feed unsustainable growth by asset price bubbles, inflation, and possible recession. Why is now the time for added stimulus . Especially i know you have been concerned in the past about inflation risks and fis scalcal fiscal risks in the past. Why are we being so procyclical right now . Mr. Hassett i would share those concerns if the tax proposal was a demand stimulus. But the tax proposal is to stimulate supply. If you stimulate supply, theres more capital, higher Labor Productivity and youre making the workers that are already employed more productive because they have better machines to work with. That does not create a keynesian demand inflation spiral at all, but rather, the increasing capital supply puts downward pressure or at the margin given the positive gdp growth given that youre increasing supply. But we already have corporate profits are at an alltime high right now. Theres more capital sitting on the sidelines than theres ever been. Why do we think that changing the Corporate Tax structure is going to put more money to work . Mr. Hassett sir, the money is on the sidelines. Its on the sidelines kind of across the ocean. The fact is that corporate money isnt turning into factories here in the u. S. Because we have the highest Corporate Tax on earth. Its not rocket science. If we were to reduce the Corporate Tax rate, companies would come back because the u. S. Would again be an attractive location location. Wouldnt we be better off finding a way to get it much lower, 2025, whatever the target rate is, by eliminating the preferences and the exceptions that allow 25 to pay nothing . Mr. Hassett they paid nothing mostly because theyve located the money in ireland or some other country offshore and it avoids the u. S. Tax. So, precisely that is the model we are trying to sever with this proposal. Great, great. Mr. Chairman, thank you. I yield back. Thank you. Mr. Hassett i wanted to ask you what you believe the brights spots are in our economy. We talk with you regularly about some of the things that scare us and worry us. But im curious to know, as an economist not only what you , think are the bright spots but also what has surprised you about our economy over the last few years. Mr. Hassett i think there are a number of bright spots and were really starting to see it in the data with gdp going up north of 3 , well get another release. It will probably be hurricane affected, by a little bit below 2 . The expectation at the caa is were currently looking at a second half of the year that on average would be north of 3 growth. That would be on average of three quarters in a row. I think that going from the sort of new normal of 1. 9 to 3 , that that bright spot, which is a nice headline for americas workers, is mostly a attributable to a surge in Capital Formation that i think is there because of increased optimism about deregulation and lower taxes. So, i think right now its incumbent on us to see that bright spot and make sure it stays bright by delivering on the policies that we promised. But especially on taxes. I think that firms are optimistic because they expect were going to succeed. Thank you. Thats good insight. As youre aware, some of the tax reform proposals that weve been looking at have included a discussion of separate rate for passthrough entities. The idea isthat there would be the idea is that there would be separate rules to go along with the separate passthrough rate that would be there to thwart opportunistic manipulative tax avoidance. What would thoserules look like but with those will like, what would those rules look like, and how would this work . Mr. Hassett we absolutely believe that the corporate rate reduction to 20 requires some kind of commensurate rate reduction for passthrough businesses but also recognize that the guardrails around that 25 rate need to be very good because otherwise i guess lebron james is going to be getting to 25 because hes a small business. Im not a lawyer. I hear the lawyers talk about the guardrail things and i know theres a lot of optimism this can be constructed in a prudent way. I have to wait and see what the panel outcome is before i can do an Economic Analysis of it. Thank you. Thank you. I think this morning we did hear a lot of the same critiques that weve heard in the past from 1980s, you know all the disparaging remarks that you heard today. But were really in a different economy now, this information economy and the International Economy that we have. As you pointed outnumerous pointed out numerous times, people can leave and go to ireland and find a talent pool there that allows them microsoft allows them you know microsoft or a lot of our tech , companies to go there, thats what were competing with. What kind of new thinking maybe gets past some of the same partisan language that has kind of been renewed. I thought we had all sort of agreed our corporate rate was too high. Now were kind of seeing that reversion on the partisan front to same old tired critiques. What kind of new thinking can we do with this new economy so that we can get past those partisan divides . On the following up bright spots, but also that we cant really thrive and have34 we cant really thrive and have 34 growth if we stick with those old models . Mr. Hassett you know i think , theres so much that the members of this committee agree about, the fact that theres a disconnect between profits and wages, the fact that weve got the highest statutory rate on earth but theres a whole bunch of companies that dont pay it, the fact that wage growth has been completely unacceptable and its really the responsibility of the members of congress to find out why those patterns exist in the data and to come up with something were going to do about it. I understand that partisanship is part of what we do here in washington. Its inevitable. But ive not seen an alternative theory to this set of facts that is in any way moving for me. I just honestly hope that the responsibility that we all have for americas workers, for the people working harder every day and not getting more money, can help us Work Together on this bipartisan tax reform. I think its designed to be the same kind of process we had in 86 where a big tax reform passed that was a big positive for the economy. Im still hopeful that can be achieved, if people will start to focus on the actual analysis. Why have wages been growing so slowly, even though profits have not . Whats your story for that . I dont think theres a good alternative. Representative comstock and Larry Lindsay had an article where he was talking about the difference between the 3. 1 or 3. 2 growth and the 2. 1 weve had from 2011 to 2016, that average of 2. 1 . What is the difference between a 2. 1 and a 3. 1 to the economy and longterm things like Social Security and our entitlements. Mr. Hassett sure. These are going to be slightly incorrect, but they are useful rules of thumb because they are round numbers and easy to remember. If we get an extra percent of gdp growth, thats about a million jobs, a thousands dollars per household. Its a lot of money, its a lot of jobs. As we are talking earlier we , also had that skill upgrades, youre really talking about wage comstock as we were talking earlier we also had , that skill upgrades, youre really talking about wage growth of a lot more than a if you go thousand. From being somebody who maybe loses your coal job, although those are very high income, but if you move into some of these technology jobs, engineering, construction, a lot of these things also have very high pay. We need to be supporting through the tax structures, through the businessprocess, supporting that relocation and that reassignment of jobs and labor too. Youd be talking about a lot more than a thousand dollars increase when you get them into that higher information economy, right . Mr. Hassett youre exactly right. Its something weve talked about a lot in the white house. The president even tweeted about people needing to move if theyre having a hard time finding a job to be labor markets that are hot. Great. Thank you. Thank you. Thank you coming this morning. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2017] mr. Hassett, thank you for coming. Your insight has been very helpful. We are grateful for the service that you provide to the country into this administration. Should members wish to submit questions, the hearing record will remain open for five business days. With that, we are adjourned. Thank you. This week on q a they were shoving and jostling. Their target was charles murray. I was a little behind him. It looked like he was going to fall to the ground. At the time, he was a 74yearold man. I did what any decent human being would do when you see a 74yearold man on the verge of falling to the ground. I grabbed him by the arm. To make sure he did not fall. A large i dont know how many but i was really helpful of fearful of and left behind. That is when they turned on me. Someone grabbed my hair. Millbury College Professor discussesanger violent outbreak at Middlebury College last march. Watch sunday at 8 p. M. Eastern on q a. This weekend on American History tv on cspan3, and lectures of history, professor Louisa Alvarez on the 1943 los zoot suito to suit riots. Suiters, particularly,ans were identified as public enemy if not number one, number two right behind japaneseamericans. They were seen as unamerican. P. M. , on at 6 exploringartifacts the green plantation. Heree original slaveholder was very active in the slave trade. One of the things he decided to yard was a slave Auction Block and auctioneers. Tand that Auction Block where it is right now is powerful. This would have been one of the last places men, women, children would have been with their families. After this place they would have been scattered all across the United States. And at 8 00, an interview a historian on the stonemasons who built the outer walls of the white house. The front door is carved with lilies and flowers and ribbons and acorns and everything you can think of. Is very lush over the front door. The finest example of carving in america for 100 years. American history tv, all weekend, every weekend, only a. Span3 tomorrow in the house, debate and a passage vote on the 2018 federal budget. We will talk to a capitol hill reporter. Why is the house taking up the Senate Version of the 2018 budget and what are some of the key differences between what the house and senate want to do . They are allowed to skip the conference step. If they voted on exactly what it is, they do not have to go back to the senate. If they did not it would go to a Conference Committee where they reconcile the house and Senate Version. Since Speaker Paul Ryan is very concentrated on getting this done, just voting on the Senate Version allows them to expedite the process by two or three weeks. Up s budget debate sets the house conservatives say the tax bill draft is coming within days. About some conservatives, republicans being concerned about issues such as the state and local taxes, also in particular about increasing the deficit. Leadership doing to address those concerns and make sure the bill passes the house this week . They did release this framework that was ironed out by house and senate officials. And now House Republicans are trusting leadership to produce this bill that reflects that framework. Detailse still a lot of to be worked out, especially with the state and local tax reduction, how those will be treated and if they have high local taxes, will they be up to ato deduct those certain income . What kind of compromise can be worked out with lawmakers that are concerned . That would be lawmakers from new jersey, new york, california, those kinds of states. And there are divisions as well, such as the treatment of 401ks, which the president weighed in on earlier this week in the form of a tweet. You wrote that the leaders have laid out an ambitious schedule for writing that tax reform. What can you tell us about when they want to get that work . Guest the First Priority is the budget. They will do that tomorrow. Once that is done they will release the legislative text of the tax bill. We expect that next week, maybe november 1. The markup of the ways and Means Committee that will start addressing the legislative tax, making changes, will start pretty soon after that, probably within a day or two, as early as next week. The chairman of the ways and Means Committee is kevin brady and he has been fairly out front about changes in the u. S. Tax system. What have you heard from german kevin brady of ways and means and also the Senate Finance chair, orrin hatch, about how their separate products are shaping up . Guest on bradys side in the house, everything they do is focused on getting the economy growing fast. So, they want to get to at least 3 Economic Growth and work in provisions that would encourage companies to hire more workers, and dressed in growing companies, and Keep Companies in the United States rather than going abroad. This would encourage companies to buy a new machine or something for factory. On the senate side, they agree with the main principles in the framework, but the Senate Finance committee chairman, orrin hatch, has been very firm he will write his own bill. His committee will have their own version of this legislation. And we expect those differences to be reconciled after each chamber votes on their versions, then probably going to a Conference Committee in december. Host after President Trumps tweet on the possible changes in in your brady headline talking about that what are we talking about specifically here . Guest this would be the tax treatment of retirement money and how much americans are allowed to put away for retirement before that income is taxed. What brady said earlier this tok is you would like encourage americans to save more and save earlier, because apically workers at are in lower tax bracket early in their incomes, so that is less of their wage that would end up being taxed, as opposed to if they with drew and paid tax on it at the end of their careers when they are probably in a higher tax bracket. So, the president said there will be no changes to 401 k s, the way that that is structured, but brady left room for there to be some changes. Reasons is they are still looking for ways to buy paper this tax bill. Host why is taxed from such a priority for the president and both houses . Guest we have seen the stock market rise, and a lot of that was on expectation with allblicans in control of branches of government, they would be able to pass a tax code that would get the economy growing and they are really a depression to really under pressure to deliver on that. They failed spectacularly to repeal and replace obamacare. Version, passed their but that was very unpalatable to the senate. In terms of their Campaign Promises they have been talking about for definitely last year, but even years before that, tax reform is the main legislative effort that they need to get through this year in order to have something to show for themselves in the midterm elections next year. Host Anna Edgington covers congress for bloomberg. You can read her reporting on bloomberg. Com. She is also on twitter. Ge the 2018