Transcripts For CSPAN2 House Ways Means Tax Reform Markup 20171106

[inaudible conversations] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] testing microphone. [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] [background sounds] today the first and oldest committee on congress, the ways and Means Committee begins consideration to tax cuts and jobs act. Historic legislation to bring lasting tax relief to workers families and to our job creators throughout this nation. Before bin we begin, we all recognize terrible tragedy, the shooting at the First Baptist church in Sutherland Springs texas. All our hearts are heavy. Our prayers go out to the families and the loved ones, 26 victims as well as the ten texans fighting for their lives as we convene today. Our prayers are with you. It has been or than three decades since americas tax code was reformed under president ronaldhr reagan who was the most sweeping overhaul in american history. Today we face a monumental challenge of our own, coming together to fix a tax code that has become just as broken, complex and unfair as the one Ronald Reagan and congress overhauled in 1986. Our journey to aga tax code built for jobs and paychecks leapfrogs america back into the worldwide has been a long one. Our committee is dedicated substantial amount of time, energy and work to the pursuit of one landmark goal, delivering comprehensive reform to the American People. Weve held over 40 hearings on nearly a every aspect of our nations tax law, but helpful, the harmful and the horrendous. Weve had three Different Committee chairman, and over this time, weve engaged in substance discussion with nearly 60 Different Committee members, republicans and democrats, men and women and progressives and conservatives. All of our efforts have led to this moment, this one moment Committee Action on the tax cut and jobs act. Today, we stand on the doorstep of delivering the most sweeping tax overhaul and more than 30 years. Make no mistake, this day in this historic legislation is not about us, its about providing longoverdue relief to american workers, families and job creators. Its about making americas economy stronger than ever. Under the tax cuts and jobs act, the middle income family of four making 59000. Year will see a tax cut of nearly 1200. That means you can keep more of what you earned to spend and save and invest however you see fit. Under this bill, we are also going to get jobs and paychecks growing again. According to the independent estimates from the nonpartisan tax foundation, the tax cut and job act will lead to nearly 4 higher gdp over the longterm. It will increase wages by over 3 and boost aftertax incomes by more than four. This bill will create nearly 1 million fulltime american jobs throughoutr this country. Its exactly what this means for the American People what it means middle income families will see their aftertax incomes go up by an average of roughly 2600 nationwide. From coasttocoast, the era of stagnant wages is over. In california, middle income families will get an estimate boost to their paycheck of more than 2900. For my constituents in texas, and more than 2500. In newpa york, over 2700. This growth of jobs and paychecks comes directly from the bold reforms included in the tax cuts and jobs act. Under this bill, we deliver the lowest tax rates in moder modern history for American Businesses of all sizes. We take strong action to stop american jobs from moving overseas, and at the same time, unleash investment right here in our community. We give American Businesses andd workers the tax code that will help them compete and win anywhere in these world, but especially here at home. From top to bottom the tax cuts and jobs act is the most transformational bill since 1986. This bill is far more than a question of progrowth tax policy. This is a restoration of basic freedom that all americans deserve. Only special interests now get to enjoy, under todays a broken tax cut. This is freedom from a tax code so complex. Nine out of ten americans will be able to file their taxes using a simple postcard style system. Can you imagine a tax code where each of us knows what our deductions are because we have exactly the same ones. This is liberation from high tax rates that punish hardworking americans while watching special interest get up past. This bill is more than fundamental reform. Its a fundamental departure from attacks system of special interest, by special interest and for special interest. With this bill, there will be real simplicity, real fairness and real freedom for every american. In closing, i want to thank every member of this committee on both sides of the aisle who have contributed to making this day possible. I cannot be more proud to be here with you and i can only hope for a spirit of bipartisan ship over the days ahead. I also know that 435 members of the house have great ideas and some have priorities that are not ultimately included in this bill. Let me assure you, this is the beginning of the tax reform process. We intend to work, improve this bill at every step in the process. I continue to welcome your input. I can also assure you, this is not the last tax markup, i look forward to working with all of you on additional policies to help our families and grow our economy. Having saiddd that, this is our moment to make transformational tax reform a reality for the American People. Lets seize it in a bold way that they deserve. At this time, i recognize the Ranking Member for any opening comments you may have. Thank you, mr. Chairman. We certainly share the empathy youve offered on behalf of those victims in texas. Mr. Chairman, i believe the bill before us today is a bad idea for millions of americans , particularly those in the middle class. The legislation which was crafted solely by the Majority Party behind closed doors, and which was not made public until late last week, it forced millions ofil American Families to watch as their taxes will go up. Thats not what the American People asked us to do and its not something we intend, as democrats, to support. Into thousand one, republicans offered a taxcut of 1. 3 trillion. In 2003, republicans offered a taxcut of an additional 1 trillion, and in 2005, they offered a root repatriation tax holiday. Each time, they promised job growth. However, they took us to the casinono each time without a win so why do we think we will have a win withca this proposal . Nk there offering is based upon the following premise, maybe, maybe there will be 3 growth. Maybe therell be three and half growth, maybe there will be more investment, but we could also say, based on the three examples ive cited, maybe not. We have a million new veterans we need to care for and our military is committed around thee world and we can afford another gamble. Since my first day as Ranking Member, i called upon my colleagues to Work Together on real reform for real people. I agree with my republican colleagues that our tax system is far too complicated, contains parts many loopholes, and holds back American Businesses from competing in the global economy. However, i do not agree that enacting tax reform means giving more benefits to the welloff and wellconnected with the hope that it might trickle down. There is not a single mainstream respected economist in this country that will argue tax cuts pay for themselves. History has proven it does not work. The last time the house worked on a successful tax reform measure as cited, the process was quite different. The tax reform bill in 1986 was written in a bipartisan manner fromrm start to finish. It unfolded over a year starting in oh 82 with countless opportunities to examine the legislation and to make substantial changes. That included 30 hearings on the bill and testimony from 450 witnesses. The markup alone lasted for 26 days. This is a missed opportunity. I truly believe instead of a closed process with republicans used in developing this legislation, if we instead Work Together on a bipartisan basis which included an open debate, we would have and could have developed a bill that was better for our economy, American Business and indeed middleclass families. There are things that everyone on thisldas place can agree on. President obama offered a change along with secretary lou. This could be negotiated and we are missing that opportunity. No we need a tax code that is far less complex and we need a system that encourages innovation and growth. That mr. Chairman should have been the startingat point for good faith bipartisan negotiations. The middle class inho america, they are struggling. For years they have watched as the wages with stagnant and their hours were cut, and it was my help hope in passing tax reform that we might take those americans who feel forgotten and left behind into consideration to build the tax code founded on fairness. This legislation does not do igat. The legislation we are marking up today let the American People down at every step of the lives from birth to retirement. It fails to provide the needed improvements that could assist the hopeful young family and trying to keep their head above water. The student trying to do the right thing by getting an education, the factory worker at the end of a long career just hoping to have enough dignity of which to retire. Ucae we believe that instead of pulling down the ladder of opportunity for those in the middle class and the millions that aspired to it, we should be expandingng that opportunity to make sure everyone has a fair shot. The legislation is felt flawed. It t t will hurt the teacher who spends his own money to buy School Supplies for his students for the young parents who want to know the joy of adopting a child. Students trying to responsibly payback their Student Loans. The wife trying to afford her husbands alzheimers care and the janitor who wants to retire with dignity so he can spoil his or her grandchildren. Let me remind my colleagues for consideration that we have agoy, also just a week was going to go after americas Retirement Savings plans to offset the tax cuts they propose. Eventually, i will remind all that if this doesnt work, we will be back to those very issues and include medicare and Social Security as well. I worry thiswo impact will have a huge influence on our housing market. It scales back the tax benefit of buying a new home. It will inevitably lead to lower home values, it eliminates the new market tax credit, and issues that i have championed during my career. Thats why groups like the National Association of homebuilders oppose this legislation. Mr. Chairman, we can no longer accept the status quo. I hope we will have an opportunity to make america get rich and richer and create more wealth and opportunity for all. We cannot afford to only care about deficits htoto when therea democratic president , including bill clinton and barack obama. I hope at this time we can set aside this bill and start again in a bipartisan manner for a new approach to tax reform that provides real reform to real people and gets the economy growing again. Thank you. Thank you. Before we get started with consideration of hr one, i can say pursuant to rule 19 i intend to roll votes on any vote that is requested. I will give ample notice for when postponed votes will be called. We now proceed to consideration. Without objection it will be considered as read and open from them ats any point. It was distributed in advance along with the green sheet explaining that without objection it shall be considered as read, amendment at any point in considered base tax for purpose of amendment. I will now turn to tom, the chief of staff of the joint committee on taxation to provide the technical disk captive amendment. I would ask that the members hold their questions until after his presentation. He mr. Chairman, i would respectfully offer a motion pursuant to clause for a of house rules, moving to postpone consideration of this bill until next tuesday november 14, and would ask respectively to be heard on my motion for five minutes. I know you feel that the American Public not and i know you feel passionate about this. I felt passionately about it. The last time i asked him to giveth us one additional week, that was defeated by the majority and the majority adopted a bill that President Trump himself declared was a mean bill to use his words. Certainly the president was correct that the healthcare repeal taking way coverage for millions of people was mean, very mean, but i believe today with this legislation, youve gone much further and the damage that would be done to our economy and to our families is much more farreaching. The motion that im presenting at this time request simply that we reconvene next tuesday after you have had an opportunity to notice the first public hearing on this bill in its history. Our f objective is in sight, not delay. Incredibly, for this legislation of such magnitude, after so many years as you indicate, this plan has never had a single public hearing. Nor does any member of the Trump Administration have the courage to come and sit at that desk and answer questions about this bill. Indeed, no Expert Witness has been given the opportunity to explain this bill deficiencies, nor rush to get a bill approved on healthcare without a cbo score or has there been anil opportunity for several independent evaluation in the rush to justice over one weekend that weve had this bill. De i dont know of a time in the history of this committee when it has ever attempted to enact legislation of such breath, with such shallow analysis. And of course, despite our efforts, we still lack the tax President Trump and his 500 plus entities that might show how he and his family will personally benefit. Ti if that were not enough, we avenue an Unexpected Development yesterday. That is, thanks to a free press and investigative journalism, the release of the first information about the paradise papers. Ve that concerns offshore tax avoidance in bermuda and other island tax sites. These are explosive revelations that once again alarm about the inequities of our attack system and the disturbing amount of tax avoidance. When the disturbance avoid their taxes in bermuda or the caymans or someone else, its individuals and Small Businesses and domestic businesses that end up having to pick up the tab. Since the Panama Papers b were released about similar avoidance t last year, weve tried on several occasions to get this committee or subcommitteest to take action, including investigatory hearings. Unfortunately, we have been denied that opportunity. These new reports from yesterday raise new questions about a number of allies, his billionaire buddies and multinational corporations that have so much to gain from todays bills. They wont be smitten their taxes on the postcard. They may be submitting them in a way that allows them even more b tax avoidance than today. Rd i think about the data that shows last year 18 times as much money was reported as profits in bermuda by american corporations than by the entire Gross Domestic Product of the country. Trumps top Economic Advisor who has been the apparent white house lead on this bill,y. Gary , according to one of the reporters who presented this information has been the president of so many offshore firms that they barely fit on the new graphic. Explaining this and having mr. Offshore involved in writing this new internationalec Corporate Tax provision gives us good reason to need to explore one public hearing where this is just creating new loopholes or creating jobs only for tax attorneys and cpas. Mr. Chairman, i would just say, like the rush through trump immigration policy, the healthcare repeal disaster, we need to learn from this doe experience that this bill needs some vetting. It needs extreme betting to find out all aspects of it. If you dont have anything to hide further about this bill, a week in one public hearing will not impair your efforts heard it will afford an opportunity for the American People to understand. Trust me, it will be great just isnt a plan. We cannot afford to trust this bill when no administration witness will come before the committee. I think you for your consideration. Thank you. The questions, those in favor say i. Those opposed, say no. On that i would request a recorded vote. That is requested. Clerk, please call the roll. Excellent. Mr. Johnson, mr. Johnson though. Mr. Nunez, mr. Nunez know. Mr. Reichert, no. Mr. Roskam, no. Mr. B cannon, no. Mr. Smith of nebraska, no. Miss jenkins, no. Mr. Paulson, no. Ms. Black, ms. Black, no. Mr. Reid, no. Mr. Kelly, no. Mr. Meehans, no. Mr. Smith of missouri, no. Mr. Rice, no. Mr. Schweikert, no. Mr. Bishop, no. Mr. Levin, yes. Mr. Lewis, yes. Mr. Thompson, i. Mr. Larson, yes. Mr. Kind, i. Mr. Davis, i. Ms. Sanchez, i. Mr. Higgins, yes. Chairman brady, no. Clerk will report the vote. The motion is not agreed you are recognized. I asked her members hold their questions until after his presentation. Thank you, mr. Chairman and members of the committee. You have before you several documents prepared by the staff of the joint committee on taxation. They describe the underlying bev modifications made by the chairmans amendment and the nature of the substitute. You also have his supplemental information, our revenue analysis and distribution analysis. There are many changes in this legislation, and i will try to give an overview of the number of important points. On the individual income tax, hr one would change our system to provide that there be for tax brackets of 12 , 25 , 35 and 39. 6 applicable to ordinary income. In general, the tax rates applicable to Capital Gains and qualified get Dividend Income would remain unchanged. Another significant change is that the legislation would nearly double the standard deduction to be effective. Filers 12200. Personal exemptions would be repealed. the full proprietorships. This max memory could be a rate of 25 . It would not apply to the provision of professional services. It would not apply to provision of Financial Services. The maximum rate would apply after a safe harbo calculation in which a taxpayer calculates their income as they otherwise would under present law. 70 of which would then be deemed treed income and taxed at ordinary income rates. 30 would be deemed as capital source income and tax at the maximum rate of 25 . This provision would also allow taxpayers to circumstance may warrant it to prove out of that safe harbor. In addition, a significant change made by the legislation is it increases the present law Child Tax Credit, expand it to a value of 1600 in addition creates a separate tax credit a taxpayer, the taxpayer spouse andn nonchild individuals woud bebe nonchild dependent under present law. That separate credit is a value of 300 i should note under h. R. One that separate credit expires after five years. The legislation also modifies the American Opportunity tax creditit and section 529 educatn savings plan while repealing several other education provisions of president law appeared in terms of deductions, he retains an itemized deduction for mortgage interest although modifying the deduction so it is applicable for in the case of new mortgages, not in excess of 500,000 initialal mortgage amot would deny the interest seduction of present law for home equity loans in for second homes. Retains the itemized deduction for charitable contributions, retains the itemized t deductios for Real Estate Property taxes although capping its value at 10,000. The itemized deductions would be repealed under the legislation acid via a number of exclusions and above the line deductions provided by present law. The legislation would double the present lot exemption amount gift taxes under present law approximately in this year exemption amount is worth just under 5. 5 million make the exemption amount approximately 11 million that would apply to individuals who died before 2024. After 2023 common the estate and Generation Skipping taxes would be repealed and the gift tax, which would be retained would be modified to have its reproduced from 40 tore 35 . With respect to business income and business taxpayers, the Corporate Tax rate would be lowered from present law statute rate of 35 to 20 pay the alternative minimum income tax applicable to corporations would be repealed. Bonus depreciation under present law would be expanded to instead of a 50 firstyear deduction, it would be 100 firstyear deduction. That would be applicable to dash through the year for property placed in service through 2022. Section 179 expensing, which under present law permit amounts by qualified business is about to 500,000 to be expands. That limitation would be expanded to 5 million. That provision also would be applicable for property placed in service through calendar year 2022. The legislation would expand certain smallbusiness relief such as relief from a cruel accounting methods and certain inventory methods for any business that has annual gross receipts of 25 million or less. And the limitation on net interest expense that may be claimed by Business Enterprises of any type. The limitation but generally apply only to interest that is in excess of 30 of the business entities have taxable income. The Real Estate Enterprises and for Small Businesses. Legislation would repeal section 199 domestic activities deduction and repeal pretty much all business credits retaining the Research Credit retaining the low income tax credit. The legislation would terminate the authority to issue private activity,e tax exempt bonds and would repeal advance refunding about taxexempt bonds. It would modify the calculation of Life Insurance co. Reserve and modify certain discount both for property and casualty reserves. With respect to crossborder Business Enterprises and would provide 100 dividend and would conferer and the present law worldwide tax system to a territorial tax system. This is is only applicable to active income the safeguards in terms of passive income would generally be retained. In connection with the change from a worldwide tax system to a territorial tax system. There is a provision that provides a deemed repatriation of earnings held up sure im tax, and on repatriated. H. R. One also provides certain base erosion protections. It provides a new interest stripping rule to look at interest expense relative to the income United States compared to interest expense relative to worldwide income of Multinational Enterprises. It would create a regime that would include certain defined high return in time as part of a subpar inclusion at half the ordinary rate. What that means is defined a high return income there would be current taxation and effectively a 10 tax rate. In addition, it would provide an election to certain taxpayers related to back up, forgive me for this stumble. In the case of taxpayers of greater than 100 million annually in crossborder related party payment, it would impose either in excise tax on those payments or let those taxpayers elect to be taxed as if they had effectively connect to the income. Thatif would mean they could elt to be taxed on a net basis for certain foreign costs are allocated to the income earned in the United States. Th legislation would also make several changes to rules applicable to taxexempt organizationl. Mr. Chairman, that provides sort of my highlevel overview of the many significant changes proposed by h. R. One. It would be happy to answer any questions that members might have for more details or further explanation. Thank you. Anymore questions . Recognize. N you thank you, mr. Chairman. Mr. Barthold, could you describe to us on the bill we are at nine today . B yes, mr. Neil, the distribution analysis we provided is gc acts 4917. This is the standard analysis that the staff is prepared for the committee. We actually have unnerved website available the explanation behind it. What we tried to do here is the book at what changes affect business that we look at the economic principle that ultimately businesses dont pay taxes. Those taxes are born somewhere else, so there is an incident assumption based in it, which is with a substantial nonempirical economic literature. Beyond not, the table somewhat speaks for itself in terms of looking at changes in average tax rates thatit would result, totaling the effects were business changes in individual changes. That is what we see in every other year basis starting with 201919 through 2027. When you take a look at the pastor changes come pastor changes, do you consider those in the individual bucket or corporate bucket or both . Will come in the table itself as i was just noting combines everything. If you are referring to the supplemental table that we provided on the very last page of gc acts 49 where we broke this into an individual component, as i explained in the walkthrough, we take the rate on tax your income as an individual tax rate issue. So the rate effect of that pass through proposal is part of the individual analysis and not summary table. The business provisions such as denial of certain interest expenses, the expensing provisions of the changes for smalll business, some of those will affect those the corporations, some will affect s. Corporations, which are pastors. We treat those in the business breakout cable. Mr. Barthold, and that juries are one and that youre rich or one eliminate the deduction for taxes . Nd local income for individuals pay the taxes the individuals could otherwise claim under present law would be repealed. Doesnt that eliminate the state and local taxes . Has come an election for taxpayer to choose the sales tax or the individual. Even with the state and local property taxes in excess of 10,000 . That is correct, sir. Cbo Discretionary Spending for transportation has fallen as a percentage of Gross Domestic Product and between 1967 and 2016 declined from 12 by 7 to 654 of gdp. Mr. Barthold, howl rising interest costs and deficits affect the ability of the federal government to support transportation and other Infrastructure Investments . Mr. Neil, youre asking for broad congressional budget fiscal planning question thats not my area of expertise. Barthold does is squeeze it . In additional expense in any area means that congress will have to make decisions on how to allocate revenues for expenditures. Thank you, mr. Chairman. Thank you, mr. Neil. Mr. Levin come you recognize heres the mac we appreciate your putting that together though that wasnt discussed in their presentation. If you look on page six, it would appear that beginning and wanted 23, of people making 20,000 through 40,000 would be paying more income tax. Is that correct . Yes, sir. That is what the column shows. Do you know how Many Americans in those categories are included . Yes, i do have our projections of that. In the 2023, we project approximately 22 million tax filing unit in our income category of 20,000 to 30,000. Approximately 16 million tax volume units 20,000 to 40,000, just under 14 million tax00 filg unit, 40,000 to 50,000. Okay, so just looking through 40,000, just those two figures. 16,000. Beginning in 2023 would be higher taxes. On average, served. Is that possible those between 50,100,000 would be gettingan more taxes depending n their deductions . Are you looking at the table . Yes. Returning 50 again on average, it 2023 our Analysis Shows stack reductions on average between 40,200,000. Individually, the change in taxes for those people, its possible they would be paying more taxes depending on deductions, right . As averages come in because of substantial changes in the underlying legislation, there may be substantial differences across different taxpayers. The answer is really just depending on their deductions. I just want to say a raise this because the House Speaker said the focus on middleclass tax relief, i quote, the focus on direct and not tax relief to the people in the middle and the people who are trying to get their and that is why we put our emphasis on that tax relief for those people who are in the middle, end quote. I think this distribution table shows that the speaker as statements are rated deserves for pinocchios. Because these tables show very much that isnt true. Look at t table five and a lookt 2027 if you would. I think. It shows that those making a Million Dollars and more, for then there were via cut of 36 just come in the entry in the far lefthand column. Do you know how many taxpayers are making over a million, on average how much they would receive . Our projection for a number of tax filing unit over 1 million in 2027 is 629,000 tax filing units. I urge everybody to just do the math and if you compare 36 billion to those between 20 and 50,000, and that totally overshadows. I hope others will ask about packers becausead as we discussd earlier, pastors go mainly to wealthier people. Making over a Million Dollars. The terms expired. Mr. Barthold, according to the analysis of tax cuts, a few were a married couple with two kids earning 59,000, thats the median throughout america, almost 1600 in income taxes. Under the tax cuts in jobs act, only al about 400. Thats a 75 cut in your taxes. As a literature distribution, it appears that earners in the 50 to 75,000 range, which Many Americans feel is middle income in many states come and they will see an 8 reduction in their f taxes. Those on the upper end make half a Million Dollars to a million. They will see tax relief as well, but it is about half of that. My distribution analyzing your joint tax tables looks light out of the tax cuts for families and businesses, just next year, just next year, nearly 60 will go directly to those earning below 200,000, which in some of our high tax states come and that feels middle income because they are taxed so horribly at the local level in their cost is so high. Are those the ranges you are looking not or should mark mr. Chairman, yes as reported in the table. Let me just make one note reminding the members that the income categories that we use are not cash takehome pay. It is more expensive to reflect that some individuals may receive substantial retirement benefits. For example, through their employers and so we measure income on an expanded bases for those that dont have employer benefits. We dont say that their takehome pay puts them in the same category as someone who may also have retirement benefit. Those are steps on the broader view, but on the tax cuts or new distribution table, you look at tax relief for families or Small Businesses and ultimately on the corporation side of it. That is correct from mr. Chairman. In terms of interpreting the income category, not to think of the income category of cash takehome. Can i ask about tk comes here. It seems like for many people to get a deduction that helps them they have to itemize. For a lot of americans, they are left behind. In texas, mr. Levins district in michigan, a hardworking bluecollar district that is Middle America and amazing, but less than three out of 10 of his taxpayers itemize, so they are left out of they receive a tax cut, but they are left out of the current tax code. I look at my friend from texas, lloyd doggett. We have different tax codes, but only 12 f itemize. So very few receive the chance for mortgage or real estate for charitable deductions. They are just left out in the current tax code. And even though mr. Doggett district received attacks could have 1200, under current law, they are very much on their own. What is the effect of now having a 0 tax rate by doubling the standard deduction, depending on who you are, the personal exemptions in the family tax cut con is that standard deduction for a family of nearly 24,000 tax rate, does that impact families that dont itemize o today . Mr. Chairman, if certainly does increase the standard deduction, will increase the number of people who dont itemize and for those who already claim the standard deduction, it further expands and additional tranche of income you do have the further tradeoffs of h. R. One repeals personalal exemptions, but it ds extend the child credit and the personal credit that i noted. Thank you, mr. Chairman. Can i ask you a question . The examples you gave, 59,000 income, as thats your opinion or is this something mr. Barthold has substantiated . Based off the distributional analysis. As he dashes that accurate or is that. Your opinion . Of the gentlemen would yield, ive control of the time. Mr. Barthold, correct me if im wrong, the tables you gave us that mr. Levin had introduced earlier are tables that factor in tax cuts on wages for individuals whether itemized or not. The effects of our smallll businesses who for the first time are not left behind as well as the impacts and the tax cuts from corporations and how they flow down her workers and families. Is that correct . Calculations embedded behind the table work through what individual would pay as well as the changes i mentioned in this missro. I have not calculated a large number of specific examples, but the calculator itself works are taxpayers of all different sorts. Perfect, thank you. Mr. Lewis can you recognize. Thank you, mr. Chairman. Mr. Barthold, thank you for being here. For 53 years, the tax code and religious, nonprofit charitable and relatable organizations by engaging in political activity. This bill strikes that standard. Last week, you were kind enough to explain. Can you explain this to . 1 billion to the rest of the committee . Certainly certainly, mr. Lewis. What you are referring to for the rest of the numbers is the modification to what some people call the johnson amendment, which isrs prohibition on political activity by religious by religious organizations. Weve estimated a revenue loss from the relaxation that is contained in r h. R. One i. Is introduced. That is really based on what has been happening over the last 15, 20 years and why people wonder present lot can do that and what they cant adapt as a charitable donation. Over the last 15, 20 years as a think we are all the are all aware, there has been substantial growth and contributions to political organizations. As a general rule, most contributions are not deduct the bowl. That proposal would say that certain political activity may perhaps now occur in religious organizations and would give incentives, in fact its very small for some contributions that might currently go to what would be nondeduct the bowl, political organizations that there might be shifting or an increase come a little bit of diversion of thoses contributios to certain religious organizations if you can make a contribution to a religious organization its deduct both and thats what leads to revenue loss. Its a diversion of some of the substantial growth in political contributions into a deductible form not deductible today. Thank you did the new market tax credit is cities across a country. Whole cities like new orleans, georgia, savanna and atlanta, neighborhood and pakistan rely on mr. Preservation tax credits. This bill ends the program. What is going to happen to these Historic Places . Mr. Lewis, as he noted, the legislation would respect really repeal a new allocations. Are you saying it would not be any new resources, new tax credit for these Historic Places all across america . There is no replication of the current law. Not modified it doesnt be repealed. Finally, what about real people . There seemed to be many parts in this bill better just plain mean. Disabled seniors, students, immigrants on the list goes on and on. Does this bill do anything to help those penalized in the tax code that cannot claim deduction for donating their work, volunteers and other people working in volunteer programs . As i noted, there are many current law deductions and credits that are repealed. He noted several of them in your question just now. I yield back. Pajama men yields back. You are recognize. [inaudible] is this paid for . Mr. Thompson, it is approximately a revenue loss i cant hear you. The revenue to the way provided projects over the tenyear budget. A revenue loss of approximately 125 trillion. Does that include interest . It does not include changes in interest. Costs. I understand that a minimum it will cost to . 3 trillion if interest calculations are added. I just want to point out as we talk about fiscal responsibility on this committee and in the house. Thatal is under the current lowInterest Rate so a lot of folks say its okay to to borrow now tos do programs and in this case to give money to the wealthiest people in the country and corporations because the Interest Rates are low. I just want to point out the Interest Rates are always low until they are not. And then you have a huge problem because then you have to start dealing with other programs that are important to all of our constituents. Health care, defense, education, infrastructure. We have grandfathered relief for harvey, irma and maria. Mr. Chairman, mr. Chairman, whynd would you have done that . Why would you take away the ability forhy workingclass people who lose their homes in disasters from being able to get a little help from the tax code . And to add injury to insult, or insult to injury, you grandfather in the hurricane folks . So the folks in texas who lost their homes in a hurricane, you take care of them, but anybody else who gets a disaster, the 9000 people in california in my district who just lost their homes to the worst fires weve ever seen, you would take away their ability to benefit from the code . Why would you have done that . I would be glad, as we discussed the bill to go through this bill. We are discussing it right now. We are going to continue and as we take up each provision of the bill, and there are many of them, i know youre passionate about them. Im reclaiming my time. Im passionate. Ive got 9000 people who have their homes burned to the groun ground. Their lives are changed, the communities in which they live areth changed in your pulling the rug right out from underneath them. I think its a more than fair question to ask why we would consider changing the tax code to take advantage of those people who, workingclass people in these neighborhoods who lost everything they own, and working to change the tax code and, as they say, we grandfather in folks from previous disasters, why in the world would we do that . Kss i would yield to you if you can explain why would we do that. Having a number of families who also lost their homes. You took care of them. You grandfather them in. Jumping, will you yield time to answer. I will yield to you. We already asked the committee in a bipartisan way to provide the loss for hurricanes irma, harvey and maria. I expect another tax relief tax will be coming forward withinar the month where, in addition to the relief for Disaster Relief for wildfires, we will also, my intention will be to take up tax relief for those families as well. I think its critical. I dont know why in the worl world. I would hope you would be a champion for that. This is a wrong message to send to people who have just had their entire life turned upside down. It is absolutely wrongheaded, its cruel, its heartless, and its the wrong thing to tell americansns, hardworking middleclass americans who have lost everything. Im going to work to ensure they can write that off. W i yield back to balance my time. Mr. Nunez, you are recognized. Thank you, mr. Chairman. Looking at the charts, in 2019, when all the policies are in full effect, isnt it true that all income groups will get a tax cut . Our Analysis Shows tax reductions across all the income categories in calendar year 2019. Thank you. And also, your tables show that individuals benefit from Corporate Tax reductions. Is that correct. As i noted a little bit earlier, its businesses, not just corporations who could be passthrough entities. So Corporate Tax cuts can help with the middle class. That is part of the analysis to which i referred later, earlier. Thank you. Also, the tables do not affect potentially the growth rate so the tables can actually underestimate the actual anticipated growth rate because youre not using a dynamic scoring for that. The analysis that my colleagues and i have presented here today is using our conventional modeling which does account for a lot of behavioral changes, but as you know, it does not account for potential effects from increased or any change in Economic Growth, under house rule 13 a after the Committee Report we are still required to undertake that analysis substitutsubsequent to any analysis they will make. And then well have that analysis after the bill is out. We will do our best to do that, yes. I appreciate that. Mr. Chairman, i yield back. Mr. Kind, you areil recognized. Will you yield and i will yield to you if im eventually recognize. Thank you very much. Amidst the joyous celebration here thursday when this bill was rolled out, speaker ryan declared that a typical family of four was winning the prize of getting a full gas tank for year, and i just want to ask you, before our service stations are full of people lined up to get this claim withfofo their tax, if you and they did the analysis that led to the claim of the typical family of four and what they would get. I understand you did distribution tables but none of this analysisav was done by someone else. You know that its our policy to treat confidential any work that we do for any member opposite vera you are the chairman. Theres no analysis youve done here, and you dont know whether any credible methodology was used in making up these claims are not. Let me ask you, also about something i know you do know because your name is on it, and that is in october 2013, the jointt Tax Committee put out modeling the distribution of taxes on business income. Is it not correct that in that report you determined that the effects of Corporate Taxes and changing them, 75 of the tax is borne by shareholders by capital, and only 25 by workers. S. Thats actually the long run, about the same time the Treasury Department said you were a littlee conservative. Since foreigners own 35 of u. S. Corporate stock, they will get 70 billion from this bill. Because they are foreigners they wont have to pay a nickel of taxes on that. I cannot confirm mr. Rosenthals calculations, but it is the result and it is not part of our distribution analysisis. But the foreigners wouldnt pay any taxes on this share with day. Im sorry, i didnt hear that. The foreigners would have to pay taxes on any increased dividends or share buybacks that they wouldey have. As a blanket statement, thats not completely correct. Investorsf foreign have effectively connected income in the United States. If theyre not in that situation. They are subject to the Corporate Income tax. The normal Foreign Investment would not be in that situation. I want to ask you also, there was another joint taxation committeel f f report and that s the one in 2011, also under your direction that concluded, as many other people did, but if you eliminate every Corporate Tax advantage, loophole, you can only reduce the Corporate Tax to 28 . That has not been changed by joint tax since then, has it. We have not reproduced the 2011 study. I do recall the 2011 study. Thank you. Thank you very much. Let me ask, the New York Times has estimated President Trump will personally gain 1 billion from what is being presented here today as a middleclass eed tl tax bill. You will be able to do a little more than get a free tank of gas for the year. If you had the last decade of his tax return for him, his family, his 500 plus entities, which your staff have the capacity to do hly an evaluation of those and the working papers to determine how accurate the New York Times is , and present us a line by line analysis regarding how much the president will be enriched by repealing the alternative minimum tax, expanding the tax, the loophole or passthrough, and maintaining the current interest loophole that he promised to abolish. Is that something you have the capability to do under the tax code and with the experts you have in youro office. I t will make two or three points. My colleagues are extremely capable. They are not auditors, thats a different developed skill. To undertake the ten Year Analysis that you are talking about, i would require a lot more Financial Resources to hire additional people. Right. Like the first time i made an amendment to do just that. Thank you, mr. Chairman. Before i go further, i just want to note something. He use the term free tank of gas that will supposedly come out of this legislation. The free tank of gas that we are referring to, these are taxpayer dollars they get to keep in their pocket in order to pay for that tax. They worked hard to earn. Isnt that correct . Thats not money that we are somehow giving to the taxpayers, actually its money we would rather take the pairs unless we reform the code and they get to their dollars for whatever they chooseom to be used for, such as tanks of gas. Isnt that correct . I believe the reference quoted was the tax savings could be used. Tax savings means were not taking those dollars from those hardworking americans. So this is their money theyg get to use for that free tank of gas or for whatever they so choose to do. Isnt that correct. Yes it would be. You are very familiar with the tax code. Ive known you for years and i know youre very familiar with it. I want to clarify some of the h here. What i have on my right is a pile of the regulations and tax code as it exists today. Do you happen to know how many pages that is . No i dont. Depending on the different publisher and whether you count the footnotes, you can get different results. Your stack is impressive. Thank you. It. Preciate i do like my stack because it shows, in my opinion the complicated nature of the code of 70000 plus pages. Hr one i represent you today, how many pages is this00. I believe its 429 pages if my count is correct so to mr. Doggetts request, to delay the proceedings for one more week, that would mean every american, the 300 peopleme that live in america would be subject to the 70000 pages of existing tax code, and all of its complications and all that special interest and loopholes t for at least another week because these guys dont want to get to 429 pages of legislative tax for us to debate this week. Is that fair to aas say. Im sorry. I think i made my point. I dont need you to answer that. Withy, that, i yield back. His time has expired. Mr. Larson, would you yield . Excuse me. What were those again. Treasury 12 and three. We dont want to lose any of these. Sincend this is the theater, and thats all this is today, is theater, this is, as we started out the conversation, the oldest continuous committee in the United States congress, and without a hearing, you are going to with the great charade. I would like to call the head of the department of Revenue Services from the state of connecticut. Have you heard from him . I have not received a phone call. Has he been called as an Expert Witness . No. He has been called as an Expert Witness. The transfer that will take c place, i will take lees eltons comments about the transfer of wealth from one region of the country to another. On the backs of hardworking people of the middle class, you talk about taxing success, all of our working professionals, whether their machinist or teacher, in the case of the teacher, if they reach into their pocket, they have paid for their students, you get rid of that deduction as well see can give it to somebody whos already gotten 11 million deduction on the estate tax. This is outrageous. You are all good and honorable people. It is hard to believe that we find ourselves in this situatio situation. You just went through this with the healthcare act. The American Public just witnessed again what happens when you jamam something down, and for the American Public, understand whats going on here today is 2416. That is the only thing you need toha know for this discussion and debate today. I apologize to you and your hardworking staff because you arepo merely a showpiece today. Its your camouflage for whats really going on here. Its been stated over and over again that they need a political win. You know who needs a win . The American People need a win. They need to see us acting in regular order responsibly. Mr. Neil pointed out on his opening remarks in the Tax Reform Act of 86, 30 hearings were conducted in this committee. Twelve in the subcommittee. 450 expert testimonies. We have none. None. No one was allowed to come forward. As mr. Doggett pulle came forward, no one from the administration will even sit in front of us. We are the oldest committee in congress. Many would argue the most prestigious and members on the side of the aisle arent even entitled to bring anti Expert Witness on any aspect of the tax code that affects one 100 of our economy. One 100 of the economy is impacted and people in my state in the middle will get a tax increase thanks to the myriad of list of things you decided behind closed doors that they, because they make itemized reductions, will no longer have. They will no longer have the state and local taxeh deduction. 4000 eliminated from the personal exemption. Medical expenses, no longer. Elimination deductions for Student Loans and adoption and Teacher Education for the classroom ando employerprovided education assistance, why, because they made a decision behind closed doors, not with any experts or testimony, but theyve made the decision that this is the way its going to be. The vote will proceed like that in the committee. Check me if im wrong on this. It will be 2416 right down the line. Thats all the way until they can get this to the floor of the house. Then on the floor of the house, they will continue too. Patch await this great myth that somehow we went through any kind of regular order where there was any bipartisanship that was alluded to. These are honorable people. This is not an honorable time or day for this committee, or for democracy in america. Not a single hearing or single Expert Witness. Time has expired. You are recognized. It took an hour and 15 minutes for that to go up. Here wee go. I dont find it necessarily more persuasive when people speak louder, but lets get right to some of these things. Weve heard criticisms from a majority, or a former majority that in this very room, move through the Affordable Care act and then Speaker Pelosi said, this is the bill we have to pass so that you know whats in it. So the sanctimonious self righteous retroactive nostalgia about process, i think we can dismiss. Mr. Neil made an interesting point, and that was, some of the sea characterized as being built on maybes and lets even stipulate that some of this, lets assume mr. Neil is right for the sake of argument. Heres my question. Lets set aside the maybes, and lets look at the certainties. What are thef certainties that people in the middle class can count on with the passage of hr one . Will the gentlemen yield. No i wont. Can you bring to our attention the tax rates, the tax credits and so forth that are certainlyn in the text that you could characterized as benefiting the middle income. To review, maybe the substantial changes that i noted in the walkthrough, hr one would change the rate structure and the standard deduction structure by doubling the 1 standard deduction. And just to pause and emphasize, that happens with certainty in the text. Is that right. It certain if the laws passed. Please continue. Rates w would change, i mentioned 12, 25, 39. 6 in the bracket rate points at the upper levels are generally increased compared to comparable rate bracket entry. Just to emphasize, that is certainly in the text, is that right. Yes it is. The alternative minimum tax would be repealed and as i noted, the child credit would be retained and expanded. This is partially offset by the loss ofdi personal exemptions but the child credit is expanded. The separate personal credit, the Family Credit for the taxpayer and the taxpayer spouse would be implemented. That is all certain relief and hr one. I want to shift quickly than to one of the observations that the gentleman from texas was makingo. Even assume for the sake of argument, in terms of the ratio of tax or business tax relief, what he was arguing was, theres a disproportionate impact favorably toward capital as opposed to labor. Isnt that a right . Even if that is true, isnt there a benefit for labor, even the folks that are the mostre critics have to acknowledge, by implication of that argument, that there is a benefit for labor. Can you highlight that . E the point behind our analysis, i was perhaps too brief before, is that theres fairly substantial economic theory and empirical findings that taxes imposed on capital in income are on business income that they can have an effect on labor income over the long haul, and the 7525 split that was cited was our longtermd analysis of the split of a dollar of tax on business, corporate business income. That were projecting based on empirical work which be 75 cents borne by the owners of that business and 25 in the long term to labor in terms of either increased employment activity, or higher wages. In closing, i think i represent a constituency that says look, im not particularly concerned about the equation by which i get tax relief. This is what my constituents are telling me. They just want to know that they get tax relief. Can you speak to that . Our folks across the spectrum, in other words highlighting mr. Nunez, folks all across the spectrum are getting tax relief under hr one. Isnt that right . Beginning in 2019. In 2019, our projections, the analysis iief just described would say there is a tax benefit to all income categories as we measure them. I yield back. Thank you, mr. Chairman. I would like to pick up were my friend from illinois left off to figure out what people can actually count on. You talk about people in the income categories, on average in 2019. Isnt it true that the major benefit they get, the tax credit expires in five years. There are three or four things that expire in five year years. So the 300 taxpayer credit and the credit for the spouse expire after five years. Yes. About the same time that the state tax goes away, one of the major benefits disappears. Isnt it true that as we move to chained cpi, but that is going to lift people up more rapidly through the income tax brackets, paying more over the course of the next tene years. Isnt that whyhy its there. The socalled chained cpi will measure inflation. So compared to current tax law, people are going to be pulled up through tax brackets more rapidly in the future. That is something people can count on. My friends want to significantly reduce the benefitsts for income tax and property Tax Deductions. Is that also true for people who would take advantage of passthrough business income . Can they continue to fully deduct their expenses for income tax and for Interest Deductions . Let me start with Interest Deductions. First, the proposal in the legislation applies the denial of net interest expense in excess of 30 of object adjusted taxable incomes to all entities regardless of if they are in passthrough form t a c corporation. With respect to income taxes and property taxes, income tax and property tax that are attributable to the production of the income may still be deducted as expenses in arriving at that income. Income taxes that would otherwise be deducted on present law schedule, the intent of the legislation is that that itemized deduction would be denied. So how much of it is going to be fully deductible . In the case of an individual such as myself, there would be non itemized deduction for incom income. If you are like the basketball coach, if you like the basketball coach in kansas who decided that hes going to be a passthrough entity. It would be providing professional services, and he has denied the benefit of the maximum rate of tax on the incomeer of 25 and all of his income taxes would not be deductible. And with the cost that he has for paying for professional help to look for new loopholes, would that be fully deductible . Taxpayers are going to be limited. Tax advice is also not deductible under hr one. For individuals who recharacterize as small passthrough. Well first of all, the individual who is recharacterized isnt recharacterized and as a general matter, tax advice received by individuals is not deductible. If you engage an attorney or accountant to help you with your accounting and legal questions, those would be deductible business expenses. My friend from new york has all these thingsnd stacked up and wave the bill. Most of those are regulations implementing a bill. If you pass this bill, there will be all sorts of regulations that you will have to promulgate in addition, and part of it is trying to put guardrails on passthrough income and that will take all sorts of rules and regulations , and people will bebe able to deduct their negotiations with attorneys and clients. The gentlemans time has expired. Thank you. Mr. Kelly, you are recognized. Thank you chairman. Thank you for being here. You do incrediblee work. One of the things, i dont know that you can address it, maybe you can, one of our colleagues that this does not result, the tax cut doesnt help people in connecticut first district. It actually comes down to tax cuts of 4096, and according to my calculations, that would take care of ten months of truck payments and four years of mortgage payments and five months of the rent payment. In my district, the pennsylvania three,ckenke we get 1971, and incredibly different amount of savings, but, the same type of result where we are saving hardworking american taxpayers money, if they get to keep more their own money, isnt that what this whole bill iss about . Thats not really a question im supposed to answerab. Thats for the members to decide. If you are a taxpayer, would you feel better or worse about this. I know you are a taxpayer. Share your feelings. Not if you lived in connecticut. Its not for me to share my feelings. Its for elected members of congress. The next time you go to buy a car or truck, i have a person who can help you navigate that. We will use your tax savings to make it easier on the pocketbook. The other thing that is really interesting, we are talking today and theres a great concern with the deficits, the rising deficits. Im trying to understand, unless you are ripped van winkle and he slept for 20 years, some of our members onie the other side have only been asleep for ten years because the debt went from 8 trillion in 2008, and its now over 20 trillion. My question would be, where these deficits hidden from people where they didnt actually see the escalation of the deficit . These are pretty much available to anybody, are they not . Im not clear. Heres the question. Who was privy to understanding what the debt level of the United States federal government was . Is a secretly held or privately held. It certainly is not private information. There are many reports that report on the level of debt and Interest Payments on the debt. So its available to anybody. I was in the private sector trying to get through some difficult times, having one of my franchises taken away to the wisdom of the federal government, a fun time for hardworking american taxpayer to hear all is on your neck and have your business anymore because the geniuses in washington decided you didnt deserve to keep that. Thats why im here. Im not here because i needed it ive career. I left a career i was very happy with to come here because i was tired of seeing Everyday Americans get bulldozed by a federal government that makes decisions that ultimately alters their life and what they are trying to do. What we are trying to do is fight the status quo. The worst thing that could come out of this committee is that we stick with the status in the remain stuckck worldview of where you would start a business, we remain stuck in the fact that we have deficits that are rising and im incredibly impressed by the fact that we can turn a blind eye to 12 trillion in debt since 2008 and look at the 1. 5 trillion today in what i would term as the biggest Turnaround Opportunity in the American Business community than weve ever seen. Thats where the jobs come from. Thats where the jobs come from. We would talk about foreign investors, why do we have such a blind eye to the fact that if you want to fix Social Security, you better have more people participating in a labor workforce. That to fund it. Since november the ninth of last year, weve seen an incredible amount of optimism in our economy. That was the result of an election. My question to you, as you said here today in your can hear this, all the way through , this is hell week, you will hear about what were not doing for certain people, but i would just submit to mys friends, that this effort is a three decade effort to change the tide of americas trajectory. We cannot continue as the status quo and leave our position in the world, not be able to see our citizens rise to a new level and sit back and say we just couldnt get through that because we disagreed on the messaging of it or their rates. I want to thank you for what youre doing and all your staff, you are incredible. My question is why do you do this . We appreciate everything you are doing and i will just tell you, you cant look at what mr. Reed has and say that somehow, if we just keep it the same, wont that be wonderful. Thank you. The gentlemans time has expired. Mr. Kind, you are recognized. Thank you for being here and for your service and for your patience. I am glad, sticking up for mike and friend from pennsylvania, at least he had the courage to raise the issue about debt and deficit under this plan. I wish there was more scrutiny of this plan. Let me just be clear, the budget resolution that my republican friends just passed recently makes room for an additional 1. 5 trillion worth of debt in order to pass this tax bill. Is that correct . The budget resolution provides for 1. 5 billion. Just for the record, getting back to my friends point, back in 2008 when president n obama inherited this godawful recession, he also inherited a 1. 5 trillion deficit from the previous ministration. When he left office earlier this year, he cut that down by over two thirds so we started heading in the right direction. This plan will reverse that and according to the Congressional Budget Office recentce estimates its currently 77 is projected to go up to 91 over the next ten years under current revenue estimates, without this plan. Im not asking you to verify those numbers, because you dont calculate that but clearly within an additional 1. 5 trillion worth of debt, that also does not include that publicly held debt, but the fact is, there are certain ways of masking the true size of that deficit. One of which, its been used in the past, its expiring or phased out provisions. Youve indicated one, but otheare there certain provisions that phase out or expire over the next ten years . Yes, as i noted in the walkthrough t, the expansion of bonus depreciation to one 100 expensing of those assets is only for a fiveyear period. It expires after five years. Thehoy expansion of the allowabe expensing under section 179 to 5 million worth of annual Capital Expenditures also expires after five years. In the family ability tax credit will phase out as well. Re and i had noted to mr. Blumenauer that the family portion for the taxpayer and the taxpayer spouse expires after five years. The child credit is permanent. And one reason for doing that, you dont have to answer this, clearly is at the size of the shortfall in revenue under this plan by expiring that, but you have been around here long enough to realize, as many of us doing committee that when these popular tax provisions suddenly expire or are on the verge of phasing out, Congress Typically doesnt have the stomach to actually let that happen and figures out a way of extending that. If thats true, then that 1. 5 trillion is really asi lowball when it comes to the public that that will be added under this plan if congress does not let those provisions expire. Is that not true . That has been the history in this place for quite some time. And i set a couple times, those are decisions for the members of congress to make. We just turned ourselves into pretzels trying to get rid of socalled tax extenders. The yearly exercise that Congress Makes to extend certain tax provisions on the verge of sun setting or expiring and then we had to have an extender package and now under this bill, we are creating a whole new scenario of another tax extender package year after year in order to retain these benefits. Let me shift again,ge w nth thes not barking. He needs to be listened to as well. That is the change in the indexing for inflation. Right now, one of the things that the plan calls for is a doubling of the standard deduction. Is that correct. Yes sir. Under current law, the standard deduction is indexed for inflation. Is that right. Yes it is. Under this plan it would be changed to a cpi index. The standard deduction, the i brackets. It would also be index, but as you observed. According to your calculatio calculation, a chained index would actually not be as generous as the current inflationary index for the standard. Those are the projections and thats whats reflected in the revenue analysis that we present on the effect with the modification to the inflation. Is the entire code going to chain cpi index. Yes sir. And that would naturally result in a less generous tax return or tax benefit for the taxpayer. I assume. Sir, that is reflected in our calculations. Its online one a for the first page of jc x47. Thank you. I yield back. Thank you. Thank you, mr. Chairman. I want to thank you and the staff for moving this piece of legislation forward with all of us. Its kind of interesting, as i listened to both sides and i appreciate what mr. Kind said about what president obama has, if we do nothing, President Trump, if he is there for eight years, will experience and 8000000000000 10 trillion debt increase. At some time, Hardworking Taxpayers are looking to get something done. They are sick and tired of the politics. Theyre probably tired of watching this hearing because were going back and forth. Theres a few on this panel who have had to site down when a hard working taxpayer works walks in with their kids with their boxes of Tax Information and they sit down and you go through their tax report and at the end they slept all that interest and ive got all that medical deductions, but you are telling me i dont meet the standard deduction. I would say yes, you dont meet it so its not deductible. The truth of it is, 75 of americans do not itemize. When we Start Talking about these deductions, we have to start thinking about that. Is that a number you can agree with . Ink know there are a number of studies. Our predictions are that approximately 29 of tax filing units will elect to itemize over the next couple of years. And if we double the standard deduction from 12 to 24000, do you have a calculation of how many people itemize. Weve estimated that for next year, under hr one that the chairmans amendment, approximately 1 6 would elect to itemize. We are talking about 6 of the people. When we talk about medical and itemized deductions, were talking about 6 of the people. Most of those are probably the wealthiest of individuals. Under present law they are heavily represented in the top third of the income distribution. I hope the other side continues to try to represent because we are trying to recognize that the middlef income gets the tax break and i think thats whats important. You also talked about the income rate for corporations. They dont pay income taxes, is that correct. They were met tax payments to the treasury, as i was discussing, the economic acknowledgment is that theyre born by the taxpayer. Our analysis is that the beneficiaries can be workers and owners of the corporations so they would both be consumer. As far as credits, i also did someme work. Someone said did i do this credit or that credit. In many cases they would not see the credits are getting today because in essence their tax cuts would equal the credits they already have, is that a true statement. That can certainly be the tradeoff for many people. A reduction in tax rates could be better than providing. In the cases, and most times, thats what will be. In some of the credits i know my colleagues are talking about, if you reduce the w w tax rate t they are going to have more dollars in their pocket because they may not have the credit but they will have a less tax rate. Is that correct. It is true that if we cut the taxes onen Hardworking Taxpayers, they will have more money to decide what they want to do instead of giving giving it to the federal government they would have more money to make choices with, yes. We can argue all day about this deduction or thatt deduction and they dont realize that 80 or 90 of the people are not itemized in this district. These are the numbers they should be looking at and make some decisions on whether we should be fighting for some of these things or not. In the end i thank you for what youre doing. I do believe this is a plan that will give Hardworking Taxpayers more h money and stop the burden of giving the federal government more money for them to waste. Our time has expired. Nm welcome to the meeting. This will be an interesting day. It will be up, i havent heard one democrat before this meeting say they want the status quo. What in gods name are you talking about . You are making this stuff up. The whole bill is made up. By the way, the new Jersey Chamber of commerce today, you got real problems. S. They come out against this legislation and their very specific as to why. They even said this, if this legislation is approved, people and businesses will have another reason to leave new jersey. I wonder what they mean by that. Ladies and gentlemen, i want to go back to thee last point. Will a gentleman yield. No. Thats the first time i never yield since ive been here. No. The irs announced an annual emplacemen inflation adjustment for 2018 last month. You know what it is . Thank you for all your patience for us, youve done a great job, 13000 for a married couple. Announced that. I said can you tell me what 13000 times two is. Very good. Everyone is telling me this misguided bill doubles the standard deduction. You just heard it from my brother from ohio. Can you tell me what the deduction will be for a married couple under this irresponsible hr one. Or next year, 24000. Thank you. Its 24000, is that more or less than 26000 . It is less. 1600 is a lot of money for most people. I represent firefighters, i represent police officers, i represent teachers, seamstresses, economists, i represent those people. They didnt write those books that you have in front of you. There are corporate lawyers who wrote them. We are here to represent all the people, lawyers, teachers, doctors so can we all agree that we were misled. The American People, by forcefully claiming these people claim that the standard deduction over these four days. Can i also ask about a personal exemption. The bill eliminates personal exemptions, correct . Thats correct. Thank you. For a married couple with two children, lets get down to the nittygritty into the weeds. The current standard deduction of 13000 and for personal exemptions totaling 16600 adds up to 29600 in reductions to taxable income. Is the new standard deduction of 24000 more or less than 29600 . Im asking arbitrarily. This is a joke. Youve got to face up to it. Brothers and sisters on the other side, this is not the bill youo want to i want to change the status quo. Isnt it true that this family would sees an increase that i just mentioned in taxable income of 5600, adding to the tax burden rather than massaging it. Let me use that word for now. Well do a little exercise in a while. With the new temporary Child Tax Credit make up for this tax increase . It would not. Are you listening . It would not. I dont care whether you live in dakota, jersey, this thing is really shafting everybody. Its an equal opportunity shafting bill. Ive got to admitng that. There are a lot of people expecting a taxcut who will be big losers under this bill. Just this morning, youre an expert in taxes, and im not, apparently, but mr. Nac, he just sent me his taxing, what he was paying this year end what he was paying last year, this is a guy who makes pretty good income. He says i listen to all of this. I listen to the campaign stuff and i listen to you guys and those guys, im have to pay almost 5000 more under this new bill. Let me tell you something, weve got major problems. If we all can come together and work out the differences or we can all play games. Mr. Chairman, thank you very much. This is an exciting opportunity we all have before us to do Something Wonderful for the American People. I am looking here at some of the data in front of us and for every district represented p on this, the average family of four, and as a member of a family of four, im very grateful for this, but more importantly for all the people back home, there is significant tax relief. V in some districts, like in minnesota, new york and washington, its over 5000 for the average family of four. This is a wonderful opportunity and a big day for this committee and hopefully a big day of Something Special for allAmerican Families. What i want to focus on is a lot of the frustration thats out here. A lot of americans have been reading about an economic recovery, yet they are still struggling to get by. They would like to get ahead and they read about how others have o recovered and how the stock market is doing so well. Yes, their incomes are stagnant. Maybe their children have gone to college, gotten a degree, gotten into debt and cant find a quality job. One of the big frustrations is that the tax code is in fair. There are people in this country who exploit the tax in their American Companies to get around existing rules or exploit existing rules, make big profits and perhaps dont pay their fair share here at home. Some of my colleagues referencedst the 2001 tax bills commonly known as the bush tax cuts. How is this different from those in addressing some of the expectations like the shifting of jobs and incomes overseas, operations overseas, that a lot of the taxpayers have stood back and watched as they struggle and others, special interests perhaps with highpowered lobbyists have created these roles or a these scenarios where some arent paying their fair share. How is this different than the tax cuts in that regard. Thank you. The 2001, 2003 tax legislation primarily focused on individuals in terms of individual tax rates and income at the individual level. The legislation you have before you and hr one makes much more substantial revisions in terms of the business tax base and the tax rates applicable to business income. You would be changing incentives that businesses have had for the past two decades by changing investment incentives in terms of cost recovery, changing investment incentives in terms of aftertax rate or return by looking at lower tax rates, fundamental change in shifting from a system of worldwide taxation for usbased Multinational Enterprises to a territorial regime, and as i noted in the walkthrough, it has certain basic erosion protections. Without all of these changes that you outline, is it likely that American Companies continue shifting jobs and opportunities overseas . As the projections are reflected on receipts is that theres not been strong corporate receipt growth in the United States in part because of benefits that might be received by investment overseas. As a caveat, its important to recognize theres a lot of Growth Opportunities abroad and there are a lot of good reasons to do things ito abroad. Is a more likely that as a result of this legislation, American Companies wille invest more here in this country, keeping create more jobs here country. We think the lower corporate rate provides a clearance not just for American People to make adjustments in the United States, but also for foreignbased enterprises to make investment. So not only do we deliver tax relief, i think we create more opportunities especially younger o workers and a promise has been broken for a lot of them. I want to thank you for giving every member of this committee and opportunity. I just heard my colleague from florida mention individuals going to college being able to have regular lives. Can you tell me how many indirect cuts are made with respect to revisions. You are asking for changes that relate to education provisions under present law. In the initial overview there are some expansions to the tax credit. Certain provisions were repealed such as the student loanan interest, the special rule for education, savings bonds as part of the modifications, the Lifetime Learning Credit is repealed, the exclusion for employerprovided assistance would alsoxc be repealed. Hr one would and contributions to savings accounts but those have to be rolled over into the section 29 plans. Also, it repeals exclusion for employerprovided qualifying tuition deduction. I have heard the majority talk about getting rid of loopholes for the wealthy and im just looking at the fact that 40 of the taxpayers that take above the line deduction was student line interest make less than 50000. Year. Innt 50 that take the above the line deduction tuition and related expenses make less than 50000. Year so, when we look at these, are any of these targeted for those wealthy individuals that experience loopholes . We have not undertaken additional analysis. I dont have anything that would dispute anything that youve just presented, mr. Davis so i really cant comment further on the extent to which some ofof these revisions are utilized by higher income. Above the line are available to any taxpayer regardless of income. Do you know howilab many taxpayers would be affected by the student Loan Interest adduction . I will have to report back to the committee on that. I will ask my colleagues to look at some of the projections on that. I think i can provide that information later. Theue adoption credits, i will have to report subsequently on that as well. I spent a lot of time with young individuals over the weekend and every group that i came into contact with were concerned about how they are going to pay off their Student Loan Debt and acrosstheboard , this becomes a major concern , and i hope as we go through the bill and continue to rework it, that somewhere or another emma we will find a way to help make sure these individuals going to college who have huge debt will be able to get some assistance. Thank you, mr. Chairman, i yield back. Mr. Davis, mr. Chairman i will try to provide information to all the members of the committee by tomorrow morning. Thank you. Mr. Paulson, you are recognized. Thank you. Even in the category, say 50000 75000, about 8 reduction in federal taxes in net income category itself, correct . The table reports the percentage reduction by category, yes her back as i have is up, below 2000 below 200,000 its about 80 of all tax relief going to that below 200,000 category. Clearly middle income, lower income folks enough for this is targeted and going back i didnt do a cumulative percentage calculation but your tabulation looks correct. Clearly, this is helping real people. Its helping teachers, students, struggling families that are living paycheck to paycheck but i think a lot of americans and certainly constituents in my district cans appreciate that tx form isntdi just about giving someone that benefited that extra dollar right now but about making our economy boom again and being competitive and having a competitive growing economy some people getting out of college will pay their Student Loans and families can have a pay increase in their wages and you mentioned earlier that some of the economic effects of tax form might be shown when you score the bill after it passes committee, going too the floor. So the economic benefits of a growing economy as part of that dynamics going. As i noted the house requires us to . Undertake macroeconomic analysis estimate of reported legislation and we will endeavor to comply with that rule. As we look at the effects then of the bill under that ru rule, Small Businesses have a 25 past the rate which the lowest rate for Small Businesses main street, mom and pop businesses that weve seen for Small Businesses in decades the larger businesses have a 20 corporate rate which you mentioned so will be competitive, not the lowest in the world but competitive in the world again. In the international forms which are important, in terms of making sure, not only american jobs are going overseas but were keeping american research, American Manufacturing and american headquarters here we will take into account those facts as a part of that scoring, as well. Are macroeconomic analysis tries among the things it tries to assess is what happens to the incentives to invest both here and abroad so, short answer would be yes. It seems to me, mr. Chairman, as is bill moves forward and as we realize faster Economic Growth it doesnt matter if youre a young person if youll see a i lower standard of living compared with their parents have or have a feeling and they have to have a growing compare of economy if theyre going to be successful to pay off Student Loans, have an economy growing where they can compete and have ample job opportunity or if youre a senior or baby boomer is b out to a tire. You are an individual that wants to make sure your savings protected, as you get prepared for retirement, anyone have a competitive growing economy as well so that our government so security will be strong and healthy. Without that we will not see thoseng impacts. It is not just the reform effort you put into the hr one that give relief to struggling families but helping Hardworking Taxpayers across the board looking to the future and giving that restoration of prosperity which is so critical in todays news. I yield back. Thank you, mr. Chairman. Im having a hard time believing that this is actually where we are today because America Needs real tax form and this bill isnt real tax form. Its pretty much a tax fiasco. Republicans have talked for years about the need to do a 1986 style tax form and this bill doesnt even come close to the process, certainly not the process, and democrats have been shut out at every turn or even the substance of 1986 where there wasas an agreement by both sides that it would be revenue neutral. Im upset and disappointed that we are passing up an opportunity to work to do something good for the American People and to do it in a bipartisan way. Instead you gone alone. In this nation we agreed, some of our fundamental values are that everyone should earn their wealth, status and their privilege. We dont believe in an aristocracy which affords wealth and leaves the rest of the people to fight over the crumbs and that is why i am baffled that this bill contemplates how can they do more for the richest people in this country. Massive Corporate Tax cuts do not guarantee job growth or increased wages for middle incomera americans. The only thing they guarantee are adding 2. 3 trillion to the deficit and who winds up picking up the tab . The class americans. American people are sick and tired of the same republican cut and cut proposal because under the Ryan Mcconnell tax plan the mortgage interest Tax Deduction would be cut from middleclass families for the student Loan Interest deduction wouldes be ct from middleclass families. State and local deductions would be cut from middleclass families. We need a text that is simpler that is there are and that supports all americans. The federal tax code is reflection of our priorities in this country this is a misguided plan at best and a really, really tremendous disaster atmi worst. Under the republican proposal are they required to pay the estate tax and estate at 5 million . Under president law theres a 5. 4 million exemption. Okay, thats a current law. Under this republican proposal would 10 million of state under a state be taxed. No. What about 1 billion in a state, would those be taxed . In thee years prior to 2024 the estate tax and the generationskipping tax would be in effect. In the full ten year window at the end of those five years would 1 billiondollar estates thewi tax. I was getting to that point. After 2023 the estate tax in the generationskipping text. Are repealed. So after 2023 you can hand over 1 billion in yourr estate tax c is that correct . Yes, that is while at theov same time we are reducing the estate taxha in this report can plan and millionaires and billionaires continue to see their tax burden get smaller and smaller in this fiasco protect phases out the tax credit that filers and their spouses can claim so that what they pretend to give to the middle class with onehe hand they actually turn around and yank that away after five years. Isnt that correct . The taxpayer credit and nondependent child expires in five years. So at the same time they take away that middleclass benefit that most middleclass families would rely on they are reducing 20 theed estate tax, is that correct . The estate tax repeal the subsequent year. Im sorry. Theres one year difference. Is or anyny wonderye how they will pay for allowing millionaires and billionaires to keep more of their money and they will take away the tax relief that republicans are so happy to out there providing to middleclass families. Think about how many students veterans food insecure families and other hardworking middle income americans we can provide for if we didnt eliminate the estate tax andat if the very wealthy in this country the wealthiest of the wealthy in this country had to pay their fair share of taxes. Thank you, mr. Chairman, i yield back. I continue to be concerned about this inaccurate parallel that some of our friends on the other side of the aisle keep making between what we are working on here in the house ways and Means Committee, tax cuts and job creation act and the tax law that was passed a few years ago back in my home state of kansas. Are you familiar with what was done at home in kansas . I will claim to know it in great detail. Im familiar with some and my colleagues on staff c have done some Research Related to some of the changes there as part of our understanding of how people respond to tax changes. Maybe you can help me set the record straight because mr. Blumenauer just attempted to apply our best will coach we love at home in kansas with some way be able to shelter his earnings from federal tax and at home in kansas they drove the passthrough rate to zero and in our bill the passthrough rate is 25 . In your opinion are zero and 25 the same thing . No, zero and 25 are quite different. It is almost like 25 times different isnt it . That would be mathematically incorrect. Thats true. [laughter] could you walk through again how the federal tax law would treat our beloved ku coach . If he put his earnings under the chairmans amendment the nature of the substitute as i highlighted in a maximumhrough its rate on passthrough income of 25 n but that maximum rate does not apply to certain types of income that might be earned through passthrough enterpris enterprises. Among them were professional services and consulting and Financial Services. For example, not to go into basketball coaches but Partners International Accounting Firm and that is a professional service and they would not be eligible and the income of that accounting enterprise attributed to the partners would not be eligible for the 25 maximum rate and would be subject to the rate structure of 12253539. 6 that i outlined. I believe that under the legislation the same would be true of your basketball coach through a Consulting Engineer of an architect, attorneys, doctors. So while in kansas, in the situation, you could pay zero state income tax but at the federal level the guardrail providee for 70 at the highest rate which is 39. 6 or above, 30 at 25 rate but in this particular instance it would all be deemed taxed at a higher ra rate, correct . They would all be consulting or professional services and my understanding is the amount the jayhawks coach is paid is that he would likely be in the 39. 6 established under hr one. Do you think that taxing at federal level, 39. 6 and zero at theo kansas rate are the sa . Clearly not. Clearly not. And then in kansas they did not close any of the loopholes to put the rate down to zero and did we close any loopholes in our tax proposal . Is probably not wise for me to label things explicitly samples but as i outlined there are number of deductions and exclusions that the hr one would repeal and a number of many all of h the business credits ad Energy Credits are repealed or modifiedne. Thank you for clearing that up. I think there is a lot of really Bad Information out there in certainly the economy of a small state at home and in the middle of the country as a whole lot different than the leader of the free world economy. I think we need to be fair when reporting these parallels. This is a good piece of legislation and we need to get washington to make it perfectly clear we need a good tax code that is fair, simpler, closing these loopholes and ending bailouts and handouts and get our economy healthy again and get more jobs, higher wages and a stronger economy. Thank you, mr. Chairman. I yield back. Mr. Higgins, your recognized. Thank you, mr. Chairman. Are you familiar with the secretary mnuchin rule. Your returning to the secretary of the treasury. The rule he established that there would be no net benefit to wealthy. Yes i am playing with that statement. Does this budget they were discussing today meet the mnuchin will test . I would say not. As head then pointed out it provides for net tax reduction in the first year of the down the income distribution. The mnuchin role was as i understand it, any tax credit would not benefit the wealthy. Under this bill the top 1 defined as if you make 730,000 or more you are aftertax income will increase next year by 8 . If you make 150,000 a year your aftertax income next year will by about 1 so it seems to me this is in direct violationn of the mnuchin rule established by the sector estate and that is why i believe this tax plan is blatant fraud being perpetrated against Middle American. Ive heard it said here and last week that when they rolled this thing out that a family of four that makes 59000 a year will experience a 1200dollar tax cut a year. Thee elimination of income in sales taxes in new york is equal to 9 of taxable income meaning that if you make 100,000 a year you lose 9000. If you make 50000 a year you loser. 4500. So if you reduce fat loss by the amount that you gain in this family of four, 59000 scenario your net loss in new york is 3300 next year. If you make 50000 and if you make hundred thousand dollars your netr. Loss is 7800. That hits hard middle families. Even the state of texas where two ands a half of taxable income is attributed to the state and local tax elimination you will lose considerably under this plan again if you make 100,000 a year its 2500 and if you make 50000 year its 1250. Eliminating all together this glittering generality that has been foisted upon us suggesting that this results in tax cuts. The problem here is that what really matters in terms of taxes is the net effect. While there may be a cut, you dont take intofe consideration, the deduction or the elimination of those deductions that is not an honest portrayal of what is goingg on here. This bill is said to cost 2. 4 trillion. I reject categorically what the Senate Approved and i view with credibility those analyses that have said it is almost two and a half trillion dollars. This tax bill will produce according to goldman economists know good growth in the American Economy over the next five years. The reason why goldman is relevant here is both the secretary of the treasury, mr. Mnuchin and the National Academic advisor, mr. Cohen, are both from goldman. If you cant convince the organization from which you came to confirm what you are saying that is indicative to me of a bill that just doesnt balance out. No good growth record deficit, no new jobs created in this tax bill is a major liability to every taxpaying american but for the top 1 . I yield back. Jason smith iss recognized fr questions. Thank you, mr. Chairman. I would like to follow up on some of the comments you made prior and is a cracking made the statement that roughly 29 of americans itemize currently under theor current tax code . That is our projection for 2017 and 2018, 30 . Ive seen around 30 and that is something i want to talk about. All of these deductions with the folks on the other side of the aisle have been talking about that they are all upset they are gone and those deductions would only affectd the 30 for the 29 that itemize, correct . To be very precise on this, mr. Smith, remember thatt we do have some deductions that are permitted above the line. So lets a medical expensing, the adoption. Medical expenses and itemized deduction. State and local income tax. There are several. So the 70 that dont itemize dont get the benefit from that. Under president law, and president economics thats correct. So, in my Congressional District 83 dont itemize. The Median Income household in my Congressional District is 40000. 17 of the people itemize in my district so does that mean that 83 of the people in my district the do not itemize dont benefit from those deductions of medical expense or adoption or adoption expense where some of the other expenses he just went over to. Under president law, that is correct, mr. Smith. To do alsoo say like state ad local income Tax Deductions benefit the wealthy much more than they benefit the poor because the wealthy have tax brackets of 35 and 39. 6 but the poor have tax brackets of 12. The value of any deduction is equal to the amount of the deduction times your effective marginal tax rate. If youre in a higher tax bracket the value of the deduction is greater than if youre in a lower tax bracket. So this iss hilarious. The democrats and the folks on the other side of the aisle are arguing deductions that benefit the 1 the most than what benefit the middleclass which is my Congressional District. The hardworking missourians and the folks back home that do not itemize. With the standard deduction help the 83 in southeastern missouri that do not itemizeks the truck. Well, im sure that some of your constituents that do not itemizeo are not have no Tax Liability under president law so changes in standard deduction would not help them but for those who have a Tax Liability increasing the standard deduction would reduce their taxable income and reduce their Tax Liability. Under this bill the mortgage Interest Deduction is capped at 500,000, iss that correct . Under the chairmans proposal there are three reforms to the mortgage interest production. Producing the president law cap of 1 million is one of them and the other two are denied the use of the mortgage Interest Deduction for anything other than your primary residence, no second homes. It would deny the deduction for mortgage interest attributed so any american to purchase a home for a i parent regimens tht is under 500,000 has their mortgage Interest Deduction. Under 500,000 debt in this. Who might cost more exactly. I dont know Many Americans that are middleclass that have a home more than 500,000 in southeast missouri. Whenever the Median Income is 40000. One other point. You said under this new propos proposal, under hr one, the ida misers would be about 6 , is that correct . Yes sir. Our projection for next year under hr one about 6 in tax filing units would elect to itemize. Only 6 according to your production would only be able to benefit from the deductions such as state and local and tax if it existed or some of the others if they existed. The only state and local income Tax Deduction would not exist under the proposal. It wouldld only be a property t. The lets say if it did exist and only if it existed its be a different calculation, sir. The electionnt to itemize and if you add up the itemize deductions and prepared to standard deduction so we were able to big you gentlemen time is expired. You are mechanized. Thank you, mr. Chairman. I know that in queens county, my county, the average price is 547,000. The house i grew up in in queens, three bedroom, one bathroom is well over an excess of 650,000. It all depends on what you describe is the middleclass, i suppose. Thank you for being here. This bill was written in the dark night with no maybe the dark off day, too. Without any democratic input. I have several questions. This includes a provision that would reduce the inflation of the adjustment of the text [leftsquarebracket standard deduction and the parts of theal Child Tax Credit by adopting an alternative measure of inflation called train cpi, is that correct . A certain. According to your estimates this change would costis taxpays to pay an additional [inaudible] in new taxes, is that correct . If i may step back for a minute and explain the table. The table in our linger so it stacks so it measures the rate reduction in standard deduction first and then we add back affects so that, yes. The answer is yes. The point is the adjustments will occur more slowly under the chain cpi. For the purpose of the question the answer is yes, correct . Qualified yes. If the a majority of successl in this controversial measure of inflation in the tax code that i believe the next step of the majority might take toe apply that same rules of Social Security to veterans pension. The word this bill is paving the way for cut in va benefits and socialut security. Im not asking you to comment. A making estimate. Chairman brady acknowledges that an nbc [inaudible] adopting the slower measure of inflation Social Security would affect over 60 million individuals each year with the effects compounding every single year thereafter. [inaudible] is really harmful to those who live along this including elderly widows. Of Social Securitys chief estimated that using this measure of inflation of a chain cpi Social Security would produce in all benefits by more than 1000 a year for a typical 85 yearold. The text of this bill states at 529 can now be used for tuition in connection with enrollment at the elementary or secondary school. Is that correct. That is correct. Its partly a consequence of the elimination the coverdale account and over of that concept of a coverdale account. Could a 59 be used to pay for school. Uniform. The statutory language is tuition and fees, sir so probably not. I think a uniform with if its necessary foror going to te school back but these are required. In a private boarding school required a classroom horse jumping could the 529 be used to pay for the horse and its lessons . I would think it could be a fee for part of the training that is provided so the answer is yes. With 5. 9 be used to transport the child to and from school . Generally, no, under the language. Tuition and fees. Fees do not include fees for education are not fees for transportation. [inaudible] let me ask you a question. If an individual attended a private school and had a horse jumping lessons could the instructor, their child, the instructors child tog that child of thest instructor graduates fm college Student Loans could he or she to duck the interest they paid on the Student Loans . Under hr one the deduction for student Loan Interest is repealed. So the child of the instructor in the private school was being taught how to jump horses would get to use by 29 to pay for the horse and the jumping lessons and the child cannot use a benefit anymore of deducting the cost of his or her for Student Loans for college. Are you back. Thank you, mr. Chairman. You have better others cover quite a period of time. Have you heard of that explanation . Yes, im familiar with the tax foundation. I think there over 80 years old. So its 80 years old. Would you consider that explanation to be an independent, nonpartisan body . I know that is 5013c organization but i really should label any organization characterized but i know the tax exempt educational organization. Thank you for your articulation that it has been around for scores of years here in this town, giving their professional opinion and i have heard it articulated that this bill does nothing. One gentleman seemed to claim that nothing with 975,000 new jobs be. An impact of the film . Are you asking would it be a positive impact if you created 975,000 new jobs by virtue of legislation . That would certainly be a positive impact on the economy. So if this foundation concluded that 975,000 jobs would be created and there would be 4. 4 increase on the wages for middle income earners and they concluded that, would that be a positive outcome for american, Hardworking Taxpayers . That would be a very positive outcome. When they talk about distribution of income which iss articulated frequently in that same foundation determined that of the tax savings some 59 would go to those earning less than 200,000 and my friend from new york, 200,000 is very much middleclass and below but that would be a positive thing for those below 200,000, is that accurate . Im sure the benefits of positive. 72 of the tax relief would go, if you took away that which is generated by the business itself to the pass through, 73 would go to those earning under 200,000. I dont want to stop talking about it in general terms. I went toac the pendant Machine Works in pennsylvania and asked the metal 14 that continues to create opportunities for manufacturing here in United States and compete on a global level and talk to the workers themselves, one of them being a person working across the board, one working in Industrial Engineering and if they had wages around 28000 a year, an individual who is working pressure he wase at a 20 tax rate, what happened with the new tax rates this year that i understand that would, produce this year. As we noted earlier, ther. Breakpoints on the brackets are moved up for a joint return the 25 bracket begins at taxable income of 90000 and a 12 covers everything between this is a single worker. We heard quite a bit about the married with two children would benefit not only from the standard deduction but the Child Tax Credit and im trying to talk about the individual worker who is there poking ahead at 48000 and would it surprise you that they found outwo that they would be returned about 1,200,000 in his pocket. This is a hardworking guy who would have money to invest back in himself. They should beti that calculati, would you have any question reason to question the accuracy of that project. Will, i havent tried to validate any particular example. Id be happy to get together with colleagues. That same company that i visited iss trying to compete against people from all over the world that struggle sometimes to make Capital Investment. For themhe to be able to make upfront Capital Investment at the veryy beginning, beyond the past 500,000, if thats a machine that the owner was explaining to meet 1. 4 millionb would he t write that off this year . Under the legislation before you he be will to write that off either under section 17179 investment or a taxpayer were making more substantial Capital Investments during the year all similar, tangible property is generally qualifies d for the oe 100 owners expensing that is provided. I thank you. I asked those questions because i point to the real impact on real, hardworking, everyday b american taxpayers. The Manufacturing Business in my district and way people will generally benefit from this legislation. I thank you for your discussion with me on that. Are you back. Thank you, mr. Chairman. I would like to start my line of questioning. I think we have already talked about the effect of hr one on individuals and businesses. I like to turn to how this bill will affect local communities and municipalities, if you can. So many of us represent distressed communities and oftentimes the code, the tax code, allowow certain credits tt will encourage investments even in distress and low income areas. As a former or recovering on lawyer i can attest to the fact that through tax exempt bonds we build hospitalsls and schools ad roads and bridges. I thank you know where im going. E historically low income communities experience a lack of investment as evidenced by the commercial properties, outdated manufacturing facilities and inadequate access to education and health care services. The new Market Tax Credit Program aims to break the cycle of this investment by attracting the private investment necessary to reinvigorate local communities. In hr one does the bill do anything to this very Popular Program . If so, what is the cost or revenue savings that wouldwh be generated by eliminating it . The legislation for your appeals future allegations of the new markets tax credit but it was scheduled to expire 2019. On page four of our revenue table under the current Expiration Date repeal of the determination of the tax credit would increase receipts by 1. 7 billion over the budget. Would it also yield the 37 billion worth of savings or Something Like that by eliminating it . Our table is only reporting the effect on federal receipts. But my point is the new market tax credit and historic tax credit and other really important opportunities for local communities to be able to build and to fund public projects is critically important. My other question to you is what would happen to Popular Programs such as the historic tax credit. What would happen under this . Legislation would also repeal the rehabilitation tax credit. What about the apartment his own. That would also be terminat terminated. Would it surprise you all existing benefits under the new market tax credit or being claimed under. The [inaudible] zone are grandfathered. It is only the repeal. Well, its all new. Thank you for that distinction. All the current benefits that one community has received by having these new market tax credits and historic tax credits youre same for future projects would be hindered by such a bill. It shouldnt surprise you that ind the state of alabama holdins hospitals in birmingham when the but not for advanced rebounding of the build upon. They were able to finance it in 2009 when we are going through a tough economic time and advanced funding allowed them in 2015 to refinance those bonds and much lower Interest Rate therefore saving Children Hospitals a lot of money. What would happen too advance refunding of bonds under this bill . The ability to advance refund bills is repealed. Bonds can always be currently refunded but the advance refunding would be so the Children Hospital in birmingham if it were currently the law would not be able to refinance at a lower Interest Rate therefore causing the hospital more, is that correct . Its not completely precise because they could refinance. But do you take account derivative effects of refunding and these bond exemptions . Sounds to me that your table onlyva looks at the cost of not doing the refunding or not having the new tax credit and not the derivative benefits of having tax exempt bonds and all the public works that they do. When we undertake the macroeconomic analysis which we are required to do we take into account the incentive effects that are built in to the economics of the underlying. So youre saying you do take into the derivative. Your time is expired. Im sorry. Just to note, taxexempt Municipal Bonds remain in hr one. Ms. Black, he recognized thank you, mr. Chairman. My dear friend and colleague from newew jersey has made some statementsd during his time that i just couldnt help but ask that he would yield because i have a particular situation of what i would like to be able to share. He may comment that if these tax policies went into place particularly inn new jersey that these policies would affect peoples decisions on leaving new jersey. It brought to mind a particular situation that two weeks ago i had an opportunity to be at a Birthday Party for dear friend of mine that turned 80 years old and he had some friends there that had moved from new jersey recently ander they made commens about what a big raise they got in their expendable income, disposable income because of the lack of taxes they are paying in tennessee related to what they were paying in new jersey. As a matter of fact they talked about the fact that their property tax their beautiful farm was 75 a less than what ty were payingg on a small house in new jersey. I thought that was interesting because i wanted to ask questions about people making decisions when they had disposable income or receive more income than what they traditionally received. This particular plan that we have and i want to use the state of new jersey that indicates that about 30 of the people are either misers and that means that 60 of the people do not itemize and would not have an opportunity to have the effect of itemization but they have an average Median Income for a fourperson household of 90000 and they would receive about 2100 under this plan. When someone gets that kind of tax break in their income just by human nature what would people normally do with having that kind of additional income within the household . Ms. Black, they would spend some and save them. That is part of the next step of the analysis of our macroeconomic that if theres changes in disposable income what effect that might have on the overall economy. What effect does that have . Increase in demand for consumption goods and increase in business ability and it can spur additional investments and lead to increased employment. At the end of the day according to your analysis what will happen here is the economy will begin to grow. Shouldnt prejudge an analysis that i havent done yet because there could be offsetting factors from the totality of the legislation but in terms of the particular aspect you identified and households have more aftertax income they spend some and they say some both ofhi which can hae positive effects on the economy. At the end of the day the truth of the matter is if you have more money in your pockets you spend more on other goods and services then established and that means all of us to better as a result of that and that is what our tax code reform is about. It is about helping those especially those in the middle income to have more money in their pocket so they can make the choices of i what they willo with their money but it also means that as they grow in the Income Growth it means that we will be able to find a way to eventually start to get our spendings and control and be able to balance our budget and at the end of the day everyone benefits by this but particularly in our plan it is the middle income earners that will benefit by this plan. Thank you, mr. Chairman, are you back the balance, time. Thank you, mr. Chairman. Will a teacher in my district who buys pens, pencils, paper for the students be able to deduct these cost from his taxdeferred turn. The general deduction for ordinary and necessary business is not so they what. Will a firefighter in f my district be able to deduct the state and local sales taxes that she pays from her tax returns under this plan . As noted previously the itemized deduction of the election would be revealed under hr one. Will a corporation be able to deduct sales taxes on business purchases on the display . Sales taxes as occurred as part of income would remain doctoral. Hollywood. Uc will a homeowner in my district be able to deduct more than 10000 in property taxes on the discipline contract. Real estate taxes under hr what would be capped at 10000. Will a corporation be able to invest more than 10000 in property taxes under the plan . Under the same role i was describing as ordinary business attributed to earning income would so the short answer is yes. If a worker in my district had some move because of his employers were forcing him to requote or potentially lose his job and he deduct his moving expenses under this o plan . That above the law is also. Will not be able to. If a company or corporation decides to close its facilities in my district by its workers and move his operation to china, say, can it deduct associated moving expenses under this plan or in another way can a corporation on this plan outsourcing incurred in relocating the us business outside of the United States. Outside of the United States or within the United States those are deductible expenses. So, would you say that this legislation treats corporations and individuals in the same terms of who gets to keep deductions and who doesnt. I would personally not raise the question that way and i think that is something that is appropriate for the members to debate. Clearly there is a difference in terms of the effect it had on individuals and policy changes they are but not similar chang changes. I wont say distinction but i was trying to draw is that earning income to remain deductible under the plan and the deduction related to as a household are the expenses they have to pay just to get by. I wanted to talk about jobs. There are 6 million open jobs nationally according to the department of labor statistics the summer and what are we doing in this legislation to help make people have the skills to get the job and my colleagues keep talking about additional jobs and in manufacturing, health and retail across the country and is it true that businesses for example their ability to pay for tuition and theres apl change n tax policy under this plan for their employees . The inclusion from exclusion from education provided by their employer is field. If filling those jobs skills training would that have an impact on our over on economy and would you look at that and if you looked at a dynamic score about whether we were actually filling jobs. As i tried to explain when we do ourn macroeconomic analysis e try to look at the economic incentives to supply labor into higher labor into supply capital and to invest capital and where and when that occurs. Thank you mr. Chair. Are you back. I think it is important for us to get back in focus there has been so much discussion of the benefits of the bill and the whole goal here and theres been a number of entities that have substantiated the statistics that weve been quoting here all morning and this bill cut taxes and creates jobs, energizes the economy and i results in higher wages and more money in the average workers paycheck. That is the goal here and we can focus on all of the separate items that we are removing from the tax code and say they are not getting this and they are not getting that and but the overall big picture is across this a country at every income level we see tax relief, jobs being created onac the corporate side and again if you want to raise minimum wage this is one of the ways to do it. As trade chairman i would throw in trade to be another way to help our economy grow. I want to go back to something our colleagues said about an hour ago in this conversation and this is regarding our enhanced standard deduction and we know that the lot for families but thatan is not all e are doing here in this bill obviously. The expanded Child Tax Creditt s a personal credits in the lower rates that are hitting now at higher brackets all combine to cut taxes for families and i wonder if you could comment on how all of those aspects that i just mentioned the Child Tax Credit, personal credits, lower ratess hitting Higher Standards how that all works together to lower taxes for americans. In terms of the individual income tax there are moving pieces that youve identified and you redefine the tax brackets and as noted you generally move up the entry point for the higher rates so that provides a general tax benefit absent any other changes. Its an increase in the standard deduction as a standalone imeasure it creates a larger zo would benefithat all taxpayers. The expansion of the child credit would generally aid all families with children and expandf the phaseout in hr one. One factor in the calculation of any particular example might be looking at is of the repeal of the personal exemption so there is a tradeoff of all the things identified that you would generally see as providing a tax benefit and repeal of personal exemption would be a negative. Its a balancing act in most situations. I think in the case you are describing and in a number of the examples that the other members have described theres a clear tax benefit and there are would be some winners and losers but thosebu are the main moving pieces on the individual side. Bottom line is lower taxes as he collated and reported on net tax reductions. More jobs, bigger projects, higher wages thing, just an observation. I was heree with obamacare was being debated on the 20 and what obamacare ended up doing was taking away healthcare choices and raising taxes. What were doing here today is cutting taxes and getting people the choice to do what they want to do with their own money. I yield back. I am looking at section 1202 of this legislation which expands the use of 529 education savings plan. In this section one provision specifically states that unborn children can be named as beneficiaries for certain College Savings accounts and goes tot define the term unborn child. Under current law if parents want to save money for their Children Future education expenses can they open 529 accounts in their own name and then transfer the account to their childfu wants their childs born. Yes, you can. I have done research and found that the only place where the term unborn child appears in the entirety of federal statute is in the 2004 lot relating to victims of crime and the 2016 laws relating to emergency medical procedures for women. Does the term unborn child appear anywhere in the tax code . Not presently in Internal Revenue code. What happens if a woman has already open the 529 account in the name of her unborn child and she subsequently miscarried what she be required to inform the irs of her miscarriage . Would she be committing fraud if she miscarried and did not notify the irs since the account beneficiary would no longer be a child in utero in the state of development in the room back step back just one moment. Under president law 529 plans are creatures of the state and they are governed by state rules and how the state established plan subject tof federal overl. Under president law if there is debt the treatment of a plan or beneficiary has died may vary state to state but yes, i understand. Id like to enter in the record two articles. R one for nbc news from the second of this year. I conclude from these articles that the insertion of this language has nothing to do with College Savings account. Instead this is an attempt by antiabortion advocates to redefine personhood in the tax code. In fact, a spokesperson from the anti choice stated that the language is a quote small increment in the momentum that we are building to ensure that one day every child is welcome and protected under the law on. The antiabortion group went even further stating that the proposed plan is a huge leap forward for an antiquated tax code and we hope this is a first step in expanding the Child Tax Credit to include unborn children as well. If this danger language starts appearing in other parts of federal law it could have farreaching implications on his health but ultimately the inclusion of this language is yet another republican attempt to block womans constitutional right to abortion at this time in the guise of changing our tax code. On another note, this bill illuminates the deduction for a limited state and local income taxes paid on employees wages, correct . Yes it does. Isnt it true that this bill allows owners of passthrough entities that are engaged in the trade or business to deduct state and local income taxes for the portion of their field to their business yes, for income capital to their business income. So a private Equity Partner receiving path through private shares could receive a federal deduction for the state and local income tax paid but a janitor at that same private equity firm would not receive a deduction for the state and local income taxes that he pays. I believe that under the legislation generally incorrect in that example is because Financial Services which is a private equity firm is included from maximum rate of passthrough treatment and their income is treated as ordinary. We will break away from the house ways and Means Committee and the work on the House Republican tax reform plan. We continue to watch us live on cspan3 and also online at cspan. Org or listen at the free free cspan radio app. Flags are flying at half staff those killed in remembrance of those killed in the church in cenex. Executive nominations are on the agenda for today with consideration of Steven Andrew angle to the assistant attorney general. First, a vote to debate and a final vote is scheduled for 5 3. Life to the floor of the u. S. Senate here on cspan2. The president pro tempore the president pro tempore the senate will come to order. The chaplain dr. Barry black will lead the senate in prayer. The chaplain let us pray. O god, you are our god