Them. Mr. Goldberg do you feel it is running adequately faster would you like to speed up the process . Sec. Kerry i will not make that judgment because there was not a nominee for the secretary of state. The first thing you need is the nominee for secretary of state. I think it will be guided somewhat by that automatically. I will not find fault without it. I do think there is a value theously on having at least recommendations. Whether you choose to follow or not is a different issue, but i think it is valuable to ask people who work the desk and work it for a long time their input on what is the current state. Is there some particular issue at the moment . I think it is valuable and i certainly would recommend it. Obviously that is not happened in a few cases. On the issue of Prime Minister netanyahu and his perception and we have had long arguments about this and long discussions about it. I dont agree with him that the settlements are not an obstacle to peace. Does that mean i want to go back to what i said earlier. They are not the cause of the conflict. If he says the settlements are not the causes of the conflict, i agree. They are not the cause. But as i said earlier, if you have a whole bunch of people who are specifically, strategically locating outposts and settlements in areas that they could make it impossible to have a contiguous palestinian state, they are doing it for the specific purpose of not having a peace. That affects the peace. There is no way 20,000 additional people moved in in the last period of time does not provide you with a bunch of splotches of islands that dont have to be dealt with in the context of where do they go. What law will apply to them . Who will protect them . Where will they go to school . Who is responsible for the services . That greatly complicates the whole topic of peace. You cant just wipe it away by saying it doesnt have an impact. It has an impact. How you resolve it will depend on the negotiation. If you dont have a negotiation, it is obviously not going to get resolved. Then the intensity grows. There have been increasing numbers if i show you a map that shows all the sectors of where the violence has been in territories, the you will see it is with the settlements are. That is where most of the violence is. There are other incidences that come in a tel aviv and jerusalem and other places, but there is a huge amount of violence. Some of it has been settler on palestinian, palestinian on settler. Having anusly is impact on peoples perception of peace. Mr. Goldberg before i go to the last question, you have six weeks or so left. There is a lot of talk about laying down new parameters. Possibly action of the security council. Can you give us any insight about where your thinking is on that, or has the election of donald trump changed it so radically we will not see any further action on this from the Obama Administration . Sec. Kerry let me make it clear at the outset. Anyave always stood against imposition of a final status solution. And against any resolution that is unfair, biased against israel and we will continue. We dont support that. No decision made about any kind of step that may or may not be taken in that regard. There are however other people out there who, because of this building frustration, need to know they are any other number of countries talking about resolutions to the united nations. Unfairs a bias, resolution calculated and he legitimizes israel delegitimizes israel, we will oppose it. There was a building sense of what ive been saying today, with some people can shake their heads and say it is unfair. There are real imperfections and problems inside that. We all know that. Adamant the palestinians about incitement and adamant to the palestinians about their need to deal with their Education System and change things kids are taught examplery to lead by with respect to the nonviolence and so forth. All of that needs to happen. I am not suggesting we are dealing with this easy place. I will tell you what i do know. I have spent a lot of time looking at this thing. My first trip to israel was in 1986 and i have probably been more times in any secretary of state. I have been and where everywhere in israel. I love israel. Ive had great engagements with so many friends there. Israel, because of decisions being made on a daily basis, quietly and without a lot of people seeing them or fully processing the consequences, is heading to replace of danger. Saying the things ive said is to say there is, i think, a better path to pursue. I think over time this small little city state which is what effectively the west bank would be demilitarized as it would be with the proper input and guidance over x number of years to be defined by the parties and by the way, you can define performance. D on which sets up standards that have to be met that provide for security. These are the kind of things we talked about with john allen and the idf and the israeli leadership. Nobody is thinking all of a sudden, boom, there is this thing and its called the state like gaza. That is not what anybody is talking about. I think there is a very different, longterm perspectives that can be defined here that allows israel to defend itself for itself. That respects israels security needs and respects all the other needs that would constitute ultimately trying to find peace. You cant do it if youre not talking and you certainly cant do it if all you are doing is building up your presence in what people think will be there state while they are seeing homes demolished and people moved out. That is not a winning equation. Mr. Goldberg diane. Mr. Secretary, this is the case of the patients being wiser than the doctors. The people are wiser perhaps than the leaders. Asked, areer openly you afraid in terms of political survival and that is why you were not willing to go ahead and stand up to the occasion and try to promote historic compromise . The other question i have given that you know where the problems are and given you have invested so much time and effort and Political Capital in this conflict, is there anything you wouldve done differently . Mr. Goldberg you would have done differently . Do you think sec. Kerry there are a few things. I will not discuss them now, i might write about them in the future. Inevitably we all make a mistake here or there. By and large i think we did the right thing and i think we approached it effectively. We had very, very difficult dynamics that were developing. You asked about libya, yemen, egypt, there is a lot of turmoil. Turmoil is frightening and unsettling. There are a lot of reasons for people to feel, whoa, this is so uncertain. Plays as any fear effective Political Tool sometimes. There is been a lot of fear in the way of people being able to feel comfortable moving forward with other kinds of choices. I do believe what i said before. I am not sitting here pessimistic about the longterm we theregion providing United States and the developed world make the decisions we need moment to address this that exists in southcentral asia, the middle east, north africa and elsewhere. Unparalleled is an a number of different factors simultaneously that are different from anything any other generation dealt with. Thenology, communications, rise of very young populations. 60 and 65 of many populations in the region are 30 years or younger. 50 under the age of 21. They dont have jobs. There are 1. 5 billion kids in the world under the age of 15. 400 million of whom will not go to school. If many of those are in these countries and they are right for the picking of extremists ripe for the picking of extremists and lying to people about their future and what happens and life on earth versus dying, exploding yourself and taking a lot of people with you, we will have a problem. An enormous problem. We had a Marshall Plan after 13d war ii which put billion into the redevelopment of countries we fought against. We are redeveloping developed countries, specifically japan and germany and europe. Our challenge now, and it has a bad name out there in the public. People dont like the idea of why would we spend a dime over there . It is all about our security and about the alliances we have with the security of our allies. If we dont face this, there is no over there anymore. It is everywhere is here. Here is everywhere. If you dont realize that, you are missing the biggest change. Runningbunch of people around with smartphones who can see what everybody else in the world has, which means they can see what they dont have. If those folks i will tell you a story quickly. Foreign minister of a country in north africa which is a fairly large muslim population, not a majority, i asked how do you deal with this . You were trying to develop and create opportunities for people. He said we are scared. He said the extremists will spend money grabbing 13, 14, 15yearold kids. After they have won them over they dont have to pay them anything. They send them out as the next wave of recruiters. They go out and bring in the next wave of young people. He said these guys have a 35 year plan. We dont even have a fiveyear plan. Now we do. With what we have begun to do with daish, what we are doing in libya. We make progress in somalia. We thought that fought back against boko haram. We have done the same with daish in libya. In yemen if we can quiet it down. We are trying to deal with the proxy aspects of that war which are complicated. Syria is even more complicated. There are about six wars in syria. Saudi arabia in iran. You have israel and has a look. Hezbollah. Kk, suni,us kerd, p shia, oppositionists against assad. It is extraordinarily complicated in the proxy is him. Proxyism. Differences between egypt and the emirates versus saudi, emerate and turk. It is hard to declare we will go in and bomb and do this or that. In beingbelieve strong. I believe it is important for us. I know the cost. The cost of the president s decision when he decided not to enforce the redline through the bombing. But that is greatly misinterpreted. It had an impact. People have interpreted it as his decision not to, when in fact he never made a decision not to bomb. He did make the decision to bomb. Recently decided he had to go to congress because tony blair not tony blair, David Cameron lost the vote in the parliament on a thursday and on friday president obama felt hearing from congress he has to go to them to get the decision. The decision was not forthcoming and in the meantime i have to deal to get all the chemical weapons out of the country. We got a better results out of not doing it, but it was the threat of doing it that brought about the result and the lack of doing it perception wise cost us significantly in the region and i know that. And so does the president. As much as we think it is a misinterpretation, it does not matter. It costs. Perception often beats the reality. I think we are on the right course. I think we will stem the tide providing we do not retreat from the region, not just militarily with our presence in our potential use of force, but more importantly right now our ability to try to deal with these countries governance and their ability to address these young people and the possibilities of the future. If we dont do that, we will be inviting a lot of other problems as a consequence. Mr. Goldberg mr. Secretary, it has been a real pleasure for me to cover you these past years. I dont know if it was a pleasure for you, but i want to say thank you and we thank you for your [applause] [indiscernible chatter] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2016] gentlemen, this we invite 2016 you to join us. Thank you. [indistinct chatter] you can see this again tonight at 12 40 a. M. Eastern right here on cspan. On thursday, the Kennedy School institute of politics hosted a forum on the 2016 president al campaign with kelly anann conway. 6 30ll say that today at and 9 40 p. M. Eastern right here on cspan. Former cia director david the trias was on the sunday talk shows this morning. Politico reports his appearance amounts to a test of how he would handle money concerns about his perspective nomination to be secretary of state, especially about questions concerning his mishandling of National Security reapers. The general pled guilty to a misdemeanor for sharing papers with a woman he was having an affair with. On abcs this week, general petraeus says he made a mistake. What i wouldeus say is what i acknowledge for a couple of years. I made a serious mistake. I8 knowledged it, apologized for it, paid a heavy price for it and i have learned from it. They will have to factor that in an obviously 38. 5 years of otherwise fairly, in some cases unique service to our country in years inand some four the Business Community in which i have continued to travel the world. Nearly 40 countries in that time. You are pressed on if you made false statements to the director of the fbi. You would knowledged that in your plea agreement, get you told the Washington Post this week he sadly forgot about the journal. I you challenging the directors conclusion . General petraeus no. Obviously i made a false statement. At the time i did not think it was false and frankly i think they might have pursued that more. I would like to add something you left out, which is that the fbi in the agreement acknowledged that nothing that was in my journals i shared, certainly improperly, ended up in the biography or made it out to the public. I think that is a fairly significant point. The book was read by a kernel at the time colonel at the time. I made a mistake. I have a knowledged it. Folks will have to factor that in and determine if that is disqualifying or not. Phonesidentelect trumps call with the president of taiwan was on the shows this morning. Mike pence said it was nothing more than a Courtesy Call. I think thise conversation was a Courtesy Call. She reached out to the president elect. He took the call for the democratic elected leader of taiwan. It is one of more than 50 phone calls the president elect has taken from an may 2 World Leaders in the midst of made to World Leaders in the midst of building a legislative agenda. Even traveling the country and setting 1000 jobs in the state of indiana. It is a reflection of the committees energy. It is a kind of approach you will see him bring the challengers at home and abroad. Have you with the team reached out to the Chinese Government since this bold up . Governor pence not to my knowledge. Should we expect a call to calm the waters . Governor pence i would not expect so. The waters here seem like a little bit of a tempest in a teapot. It is striking to me to president obama would reach out to a murdering dictator in cuba and be hailed as a hero. President elect donald trump takes a Courtesy Call from the democratically elected president of taiwan and it becomes something of a thing in the media. I think most americans and most leaders around the world note this for what it was. In ank you will see President Donald Trump a willingness to engage the world, but engage the world on americas term. I decided to spend more time on the young grant. Pointt a week at west trying to understand how this make it finished 21st out of 39 at west point. Sometimes viewed by these biographers as a historical intellectual lightweight. Yet he said himself, i must apologize, i spent all my time reading novels. Whiteight on q a, ronald talks about the life and career of the 18th u. S. President in his latest book, american ulysses a life of ulysses s grant. He could be at a meeting of African American leaders and the white house. He said i look forward to the day when you can ride on a railroad car, he in a restaurant along with every other person regardless of their race. That they must come. It took 90 years for that day to come. Grant was the last american president to hold those kind of views. Tonight at 8 00 eastern on cspans q1 day. Now, house ways and Means Committee chair kevin brady of texas on the republican plant december 5 the tax code and reduce the size of the irs. From the Heritage Foundation, this is about one hour and 45 minutes. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2016] good morning everyone. Welcome to the Heritage Foundation at the Freedom Center here in washington right across from the capital. All of those joining us today via cspan and streaming heritage members welcome. It is my pleasure today to introduce to you one of my great friends and maybe more importantly great friend of the american taxpayer kevin brady chairman of the ways and Means Committee. He was first elected to the house in 1996 two years before i got to the house so he was a Senior Member when i got there. He represented the people of texas eighth Congressional District near houston and continues to represent them today. Last june as part of speaker ryans better way he released a blueprint of a major tax reform initiative. This proposal is a key part of the conservative agenda thats going to restore prosperity in the United States and improve the well being of american families. His plan would reduce individual tax rates, the double taxation of Capital Gains and dividends would be reduced dramatically, and it would increase the standard deduction and the child tax credit. The u. S. Corporate tax rate, now the highest in the industrialized world, would be reduced from 35 to 20 . We would also move to a territorial system similar to that of most of our Major Trading partners. This would make the u. S. A more attractive place to headquarter a business and produce goods. The plan would move more toward a border adjusted destination, principal system that would treat u. S. Produced goods the same as foreign produced goods rather than according to a tax preference to imports that we have now. Lower marginal tax rates also reduce the bias against work, savings, and investment. The plan shares core components with the plan advanced by president elect trump. Im confident under chairman bradys able leadership the manageable difference between the two plans will be resolved and that we will move forward with tax reform in the congress very quickly. We at heritage will do everything we can to educate the American People about the positive impact that these reforms will have on their lives and our country as a whole. One of i think the heroes here in congress, one of my great friends in congress, please welcome chairman kevin brady. \[applause] congressman brady jim, thank you very much not just for the introduction and invitation but thanks for your leadership both in the senate and at heritage. I dont know about you but i think this is an exciting time to be a conservative. In the work thats been done over the last decade, to prepare real solutions, to change the direction of this country, now is our opportunity to do that. And i dont know about you but when i went to bed on Election Night the next morning i kept thinking one thought. The American People gave us another chance. Another opportunity to change the direction of the country in a major way as republicans with the unified republican government. We have a great responsibility here. But its also an exciting opportunity. And i think, clearly, voters rejected what theyve seen now for too many years. Which is bigger government, higher taxes, washington knows best and washington will micro manage every moment of your life. Here is our opportunity that we have dreamed of and we have to take full measure of that opportunity. Heritage, again, thank you for all the work youve done to lead up to this moment. So id like to walk you through the better way proposal, what we call our built for growth tax code proposal. It starts here. You know, i think the greatest threat to our prosperity long term is our growing national debt. I think spending cuts can get us half way or more back to a balanced budget. If we want to complete the job and actually start paying down our national debt, we need a much stronger economy. And today we are going we are suffering through the worst economic recovery in half a century. Millions of qualified americans cannot find fulltime work. You cant go online each month without reading about another company considering moving their manufacturing, their research, their headquarters overseas. We dont have to settle for that type of economy. And the built for growth tax proposal that we propose aims to reverse all of that. So when we began this earlier this year, i set out two goals for tax reform. First, rather than the tax code designed simply to wring money from you, which is what we have today, we need a tax code built for growth, actually designed to grow wages, to grow jobs, to grow the u. S. Economy. In doing that, leap frog america from dead last among global competitors back into the lead and keep us there. We want to be among the best places on the planet to invest, to create that new job, to move that new headquarters. Those two areas, growth and leap frog back to the lead drove our Decision Making in our tax reform plan. Were proposing reforms, three major reforms. First, we go all in for growth in jobs and wages. By proposing the lowest tax rates on job creators in modern times and redesigning the tax code so that we can compete, our businesses can compete and win anywhere in the world but especially here at home. The second reform is were proposing a tax code so fair and so simple that 95 of americans will be able to file using postcard style system. Thirdly, because were proposing so much fairer and simpler tax code really demands a fairer and simpler tax collection collector so we are proposing to bust up the i. R. S. And redesign it into a new style of agency that ill talk about in a moment. If you hear me use the phrase propose a lot there is a reason for it. This is not our tax code. This isnt washingtons tax code. It belongs to the American People. For the first time maybe in your lives you ought to have a real say in how youre taxed. Were proposing not imposing a proposal to jumpstart this economy, to simplify our code, to redesign the i. R. S. In a way you havent seen before. And so this is our proposal. On job growth, youll recognize many of these provisions, jim, because they were represented in Heritage Foundations 2015 business tax proposals. So, we propose to lower the rates equally, 43 offer every type of business, whether the largest corporation, or the smallest mom and pop. That has a very simple principle. We want to make sure we leave in businesses hands the ability to survive tough times, grow in good times, continue to reinvest in new jobs and new technology at home rather than send that money to washington. To grow washingtons economy. We propose for the first time full and unlimited expensing for businesses of all sizes. This may be one of the most pro growth provisions in the proposal. If you go back, we are all in for main street job creation not necessarily government job creation. If you look back the last 50 years on the indicators that match main street job creators whether Government Spending, consumer spending, on and on, look at all of them, but there is one indicator that when it goes up main street jobs go up and when it goes down they follow and thats business investment. When business is investing in buildings, equipment, software, and Technology Main street jobs grow. We propose for the first time to allow immediate, unlimited expensing of that business investment. We dont stop there. We know our businesses arent just competing on main street but theyre competing around the world. And today our tax code is no longer competitive. We tax our businesses here. Washington taxed them abroad. In effect, our businesses face a tax barrier when they want to bring their earnings and profits back to reinvest in the United States. We propose to stop doing that. Tax in the u. S. Not tax abroad. In effect, not just lower the tax gate, obliterate it. So the business rate to bring for American Companies when they compete and win around the world, the business rate to bring that back to invest in new jobs and new manufacturing and new Research Means zero tax rate. We dont stop there either. We know that today because of the way china, europe, and our main competitors tax, that maid in america products today are at a disadvantage here in america and disadvantage abroad. So we propose to match that tax approach but we propose to take taxes off made in america products being sold around the world and put it on imports coming into the United States. This, what we call border adjustability, has three major benefits. One, it levels the Playing Field for American Made products. So competition Going Forward in the future will not be based on tax code. Competition will be based on price and service and quality. Whenever you do that, consumers win. Secondly, it allows us to dramatically simplify the International Tax code which is stunningly complex today. Thirdly, perhaps most importantly, it, combined with lower rates, in a territorial system, this provision ensures we have eliminated every tax incentive to move jobs, innovation, or headquarters overseas. In fact, our goal is not simply to stem the tide and stop businesses in america from locating overseas. Our goal is to bring those investments back. My belief is that by eliminating the import subsidies, by moving to a level Playing Field, we will become a 21st century magnet for new investment on this planet. We also eliminate the double tax, the second tax, alternative minimum tax on businesses. And perhaps my favorite part of the whole built for growth tax proposal is we propose to permanently eliminate the death tax, the estate tax. This tax is still the number one reason family owned farms and businesses arent passed down to next generations. I think it is incredibly damaging to the economy. It funds a day and a half of federal spending. Its time for it to go. And so those provisions in jobs and salaries according to the Tax Foundation will grow the u. S. Economy by over 9 . Will grow after tax wages by nearly 8 . Create several million new jobs and will vault america back into the lead of the most pro growth tax codes on the planet. Thats where we go for growth on the wages and jobs. Our second reform, fairness and simplicity, comes from this. As you know, since president reagan reformed the tax code, in 1980s, it has exploded in size, tripled in size, 70,000 pages. Incredibly complex. As a former chairman of the committee dave camp once described it, the tax code today is 10 times the size of the bible with none of the good news. Thats how he described it and i would agree. For years americans have asked, why cant we have a tax code so fair and so simple it could fit on a postcard . In four years, washington dismissed that idea. But our tax team went to work and that is exactly what were proposing. A tax code that fair, that simple, that understandable that most americans will be able to use a postcard style system. Heres how we propose to do that. First, we flatten out the tax brackets. As you know when president reagan began his reforms there were 15 different tax brackets. He flattened them out dramatically but today there are still seven. We propose to flatten it down to just three tax brackets. It doesnt need to be more complicated than that. We lower the rates that each of those tax brackets for a simple reason to reward work and productivity, to encourage people to be productive and to keep more dollars in peoples households and families so they can reach their dreams. So we flatten rates. The brackets. We lower the rates. We believe it is montreal to protect more of those first dollars families earn so we propose to increase the standard deductions fairly significantly because we think protecting those first dollars are important to low and modest income workers, for young people starting their first jobs out of school, for young couples with kids, with seniors where every dollar counts. We protect more of the first dollars with the larger standard deductions. But we go further than this. And this next provision may be in my view the second most pro growth part of what were proposing. So after weve flattened the bracket, after weve lowered the rates, we propose for the dollars you earn from savings and investment to cut that tax rate again by half. So if youre at the 12 tax bracket your tax rate for savings and earnings and investment would be half of that 6 . And heres why. Were not a nation of savers and we need to. We ought to reward those who set aside money for the future. And so this is incredibly helpful for those who seek and need to save but its incredibly pro growth to the economy. Heres how. This seems like a simple example. Youll remember this from your High School Days perhaps in economics. But its a good reminder of why savings and investment is so pro growth. When you and i earn a dollar there is essentially three things we can do with it. Spend it, save it, invest it. So we can spend it. You could buy a donut. Apparently thats what i do with much of my discretionary income. Not so good for me. Good for the local economy. You can save it. You can perhaps go to the local bank. Not much interest on that, thank you, fed, but you can find a way to save it. But that money does be the stay in the local institution. It goes right back out to the local businesses, maybe the owner of the donut shop so he or she can buy a second mixer, another glazer, deep fat fryer. Maybe even add another worker for the early predawn shift. Thats really good for the local economy. At this point jim demint is asking himself why does this guy know so much about donut shops . \[laughter] the third thing you can do is investment. So perhaps in the stock market. Perhaps in mutual funds. Or, and you can see this coming, perhaps its invested in that donut business so they can add a second location or a third. Maybe expand to lunches. That is incredibly pro growth for that local community. So the reason we go, propose to you significantly lower rates on savings investment is to encourage and reward savings but also grow the local economies in a major way. And then the postcard, itself. As we look at making the code fair and simpler, we asked ourselves, even though only about onethird of americans itemize, what do they count on as families . So what we propose to you is to keep on the postcard a limited number of deductions and credits. First, we know that for most americans the home is the biggest investment you make in your lifetime so we propose to keep the Home Mortgage deduction. Were looking at how you can make it smarter and work better for more people. But we keep that on the postcard. Secondly, we propose to keep the deductions and credits for charitable giving. We like charitable giving. We think its important to give to your local church, your local community, a cause you believe in. Maybe support the college you attended. We think its important to encourage charitable giving. Were looking at ways to unlock more of that. We know, too, it is expensive to raise kids. We have two teenagers ourselves. We know this. And so we propose to keep a child tax credit, in fact, to increase it a bit to help families with those costs. And then college is incredibly Post High School incredibly expensive. We propose to keep the help you get for college. In fact, we are redesigning that as well to make sure it applies just as equally to those seeking Technical Skills which are expensive as well. So my High School Senior has decided he is going into welding. Some day he wants to own his own custom fabrication shop. Were shopping today for technical schools, expensive as well. We need those type of workers so we propose to redesign that to make sure skills at every level outside of college and then other than one provision to help get people from welfare to work that will be redesigned in a major way, thats it. That is what we propose for the postcard. That fair, that simple, that understandable. As i started at the beginning when i said we propose this to you, here is my main point. For republicans, this is your postcard. Its not ours. You can add anything back to this you want. We can add single provisions, dozens of provisions back, hundreds of provisions back. We can turn this postcard back into a telephone book if thats what you want. As long as you know, to do that, were going to have to send more money to washington and hope we can beg to get some of it back. So we can add back the provision when you put in Energy Efficient windows at your home. We can put it back no problem. That credit you get, that 7500 credit you get for buying a tesla, we can put that back. You know, that credit you get for your gambling debts, not that it would affect anyone in this room, we can put that back. We can put back anything the American Public wants as long as you know to do that washington will have to raise your rates back up and hope you can get some of it back. This is your postcard. Not ours. This is why were listening so intently right now on the tax reform proposal that weve laid out. So thats how we go all in for fairness and simplicity. The final form is because a fairer and simpler tax code demands a fairer and simpler tax collector. And the i. R. S. Today is a huge agency with the power to destroy lives and businesses. And it is targeting americans based upon their political beliefs. Thats not acceptable. So we propose to bust it up. To redesign it into three, much smaller, much more focused units. A unit focused on business staffed with tax experts on business to accurately and quickly answer business questions and resolve disputes for our businesses large or small. Another unit to do the same for families. Focus on Customer Service. I dont know how many of you tried to call the i. R. S. Lately. But you didnt get through. And if you got through, and spoke to three people, you got three different answers to your tax question. That level of Customer Service or lack of it is not acceptable in your organization. Its not acceptable in that agency. We propose a second unit focused on Customer Service, timely and accurate answers to our tax questions. Finally, because i have grown so tired in my home, i didnt move to washington. I live in a community, the woodlands just north of houston. And for years i have heard from families and Small Businesses they get into a tax dispute with the i. R. S. Sometimes relatively minor ones. They will spend years and years, thousands of dollars and even when they win, theyve lost. And so were proposing a small unit independent of treasury and the i. R. S. , in effect a Small Claims Court so americans can quickly and affordabley get their disputes heard and resolved without having to spend thousands of dollars on attorneys and accountants. So thats how we propose to redesign the i. R. S. And the 21st agency with the Singular Mission of Customer Service. So as you look at those three proposals you may be thinking, this sounds too good to be true. But its not. Weve designed this to break even within the budget, considering the Economic Growth that will come with it. This is the only way to do that. The only way to lower rates for everybody is to eliminate the hundreds of special tax provisions for some. And so thats what were proposing to you, significant tradeoffs to move to this. For example, in business, were proposing not to deduct your net interest costs. It is the change from where we are today. Theres good policy reasons for doing that. For example, allowing full expensing where we write off things immediately in the first year and carry that forward. If youre also borrowing to do that and writing off that interest, at this point were giving you a negative Interest Rate and paying you to buy stuff. Were not going to do that. Eliminating that as well allows it to go to a more pro growth, dramatically more pro growth tax code overall. But that is a big change from what we do today which is why were asking businesses large and small to test drive this to give us back the feedback as we work to improve this at every step. For families and individuals, for example, so there are hundreds of provisions. There are that apply to some. For example, in our case we adopted our two boys. Its the biggest blessing we could ever have. We didnt take advantage of the adoption tax credit. We were just in the wrong tax bracket for that. But thats important to people. What were proposing to the American People is rather than have hundreds of those provisions that apply to some at some point in their lives, why dont we lower the tax rates for everybody, let americans use those dollars for the priorities in their life whatever that may be. Thats a change from where were at today. We propose for those who itemize, those onethird of americans who itemize, that we dont deduct the state and local income sales and property taxes, which is a big change from where were at today. Heres how it works. Under the current tax code, we keep your taxes high, you send your money to washington, you hope you can call some of it back to offset your local taxes but whats going on is that everyone is subsidizing each other. So rural taxpayers subsidize city taxpayers. Middle class taxpayers are subsidizing higher earners. Low tax communities and states are subsidizing high tax communities and states. Our proposal is this. Rather than high taxes and everyone subsidizing each other why dont we just lower the taxes and everyone just pay their own . The added benefit here is that the federal tax code will no longer subsidize higher taxes at the local level. We think thats a big change from where were at today. Thats why were asking the American People to consider the postcard, to look at this, and the deductions and the provisions that count to them and bring us that feedback as well. So, jim, i want to stop to take questions from the audience but i will make the same request to you as we do to everyone we meet. Ive done more than 40 town Hall Meetings on this back home. Ive traveled the country to do the same. Coast to coast to lay out the built for growth tax reform plan as well. Test drive this. Test drive this proposal and bring us back your feedback. Now, dont take one provision out of this like the Interest Deductibility and drive it like its that old clunker of a tax car were in today. What were proposing is a new car. It has different features. It drives much differently. Most economists believe it drives much faster than the tax code were in today. Test drive the new proposal. Bring us back that feedback. Help us improve it every step. Because the timetable for us is to continue to listen to the feedback through the end of the year. Our tax teams are writing key provisions of this as we speak. Were also getting feedback to make this better as we work toward introducing this early in 2017. And now because we have a president willing to lead on tax reform in mr. Trump, while we dont know yet where this fits in that first 100 days of governing, but wherever it fits, were going to be ready to deliver pro growth tax code, tax reform that leap frogs america back into the lead and grows wages and jobs and salaries. Jim, with your permission may i stop and take some questions . [applause] yes, sir . Please just state your name and affiliation. Happy to. Thank you, chairman brady. I want to thank you for being here and commend your staff for being incredibly easy to work with receptive throughout this process. Looking for your thoughts on how to include Infrastructure Investment with tax reform. Congressman brady so there is an interest by some to use the repatriated earnings to Fund Infrastructure in some form or fashion. We took the earnings from the 2. 5 trillion of u. S. Profit to bring it back to the United States we use those earnings to plow it right back into a more competitive tax code. Lower the rates. Redesign it so we can compete and win anywhere especially here at home. Others would like to use that for an infrastructure related approach. So well listen to those ideas. I think at the end of the day the stronger economy we have the more certainty and redesign that actually grows the economy, frankly, is awfully important for investments in infrastructure or anything else. We know well be having these discussions Going Forward. Thanks. Yes, sir . All of the work youve been doing on this is terrific. And you are headed in a direction that weve waited to go in a long for a long time. I think the question that occurs to me is, in reading about this, is whereas in the house this is the direction youre going, the senate doesnt seem to be in the same planet when they talk about this stuff. And the big question comes down to is tax reform going to be done through the reconciliation process . When i think that you would be able to come up with a bill very much along the lines as you were talking about along with working with the administration and, you know, on details and things like that, or whether at least in the senate theyre going to, quoteunquote, have a bipartisan bill because, you know, reconciliation is only good for 10 years. And if they do that, is they wind up again as a few years ago in the house prenegotiating with the democrats on a bill, i can guarantee you there will be no abolishment of the death tax for example and im glad you pointed that out, something weve worked on for many years and some other provisions. It will be something more like a democrat bill. So where do you see that resolving itself . Well reconciliation may be the only option, we are going to start differently. I am inviting our democratic members of the house to engage on tax reform. Bring us your best idea on how to grow the economy, how to make the tax code fair and simple again for families. How to redesign the irs is something we will be focused on, Customer Service. We will listen to those ideas. Here is why i think we ought to. Because our democratic members of congress and their communities are suffering. They are seeing the same companies we see considering moving their jobs overseas. They cant be happy with the status quo today, and so we will offer a wide open opportunity for our democrats to bring their best ideas forward and engage on tax reform. How that plays out and if they will take that opportunity, i dont know yet, but we will open that door in a major way. Yet, so thats the approach we will take. By the way, something about this proposal. We incorporated the ideas of more than 50 lawmakers in this tax reform proposal. We looked at the thinking of think tanks, progrowth organizations, president ial candidates, so this is not just a tax proposal. We took the best ideas we could identify, which is why this is in the house the first consensus tax reform blueprint in more than 30 years. That is why it makes it more real Going Forward, and i think we have a head start on making sure we can deliver this in 2017. Thank you chairman brady. If you could point out some of the similarities or differences between your tax plan and mr. Trumps tax plan, i think we should focus on that and it might be helpful for us. I think the tax proposals are 80 the same. I think the differences are more than manageable. I think we can find common ground. It is incredibly progrowth along main street america. That is one change. We are very aggressive on the International Tax reform, and on eliminating the incentives to locate overseas, the border just ability provisions, eliminates it. Not only that, it reverses that back towards the u. S. We think that is important to growth. We are hopeful the track team will take a look at proposals like that. We have similar tax brackets as well. I do think that in recent days i have heard one thought about the wages and the taxes of the top 1 , but here is my thought. No american should be stock with the obama tax rate. It certainly hasnt grown the economy. This is the worst recovery in 50 years. Certainly it has an reduced income inequality. It has grown under this president. That sort of oldtime thinking, high tax rate, hundreds of provisions, or try to phase them out or limit them, our proposal is different. On the postcard, we are proposing everyone know exactly what each others deductions are. Below are those rates, so the help you get for home and charity, kids in college, everyone knows what they are because they are exactly the same for everybody, so we are thinking differently about how you address tax reform and every tax bracket. Yes, sir . My name is tim brown. I want to say i appreciate your comments. Im representing myself as a citizen and a taxpayer. It sounds good to me. You alluded to 1. I would like you to amplify on. I am aware that the highest marginal tax rates on working for living in this country are on people who are at a welfare standard, if you look at welfare as a tax. Can you say more about how the tax program will help the poorest of the poor have an incentive to work . Sure. So, there is no quicker path out of poverty than a job, even faster, a good paying job. It is one of the missing ingredients in the obama recovery in a major way, not just those on welfare, young people, middleclass, all but the elderly frankly, their percentage has shrunk within the workforce. This aims to reverse that, create more good paying jobs, key for those trying to work their way up the economic ladder. We think that is the ultimate answer here, coupled with regulatory reform. Businesses are creating more mainstream jobs. In my view, searching for more customers for American Products around the world, better, enforceable, productive trade agreements, i think are important as well for creating jobs here in the United States, and in the better way agenda, we propose a new way of looking at welfare. Think about this. There are more people on welfare than working full time. Take every man, woman, and child in 24 states total, that is the number of americans in poverty today. It is stuck there. It is not getting better, and it wont improve unless we rethink the way we address welfare. We lay out four key principles we know work at the local level, starting with requiring and expecting work for these welfare benefits, because that is the key access point out of there. It, my answer is it wont be achieved merely through a fair, simpler, and more progrowth code, but it can be if we think differently about how we address the issue. Chairman brady, thank you for being here today. I was wondering if you could talk a little bit, given how much work you guys will have in Congress Early next year, about the timeline and sequencing for tax reform . It is difficult to know now. The truck team, it has just been a few weeks. They deserve the chance to fill 13 out and think about the first 100 days, sort of get their feet on the ground there, so we are engaged with them now and will continue to stay engaged with them as well as we work out to find those Common Grounds on issues like tax reform and learn more. What i am here to say is that we are not focused on the process and its timing, we are focused on whenever that is set, we will he ready to deliver progrowth tax reform. That is exactly where we are at right now. One last question. Yes, sir. That would be great. I think there is one way over on the side. I get your point about the expensing and the interest factor. If you take that extension to Home Mortgages and you are allowed to write off the Home Mortgage interest, would you not also be allowed to write off the commercial property interest. We are proposing not to do that. We are putting the Home Mortgage deduction in a separate category , because as we look at the postcard, i think while some would like to have fights over individual provisions in the tax code, the debate we are looking for in america is whether americans want something this fair and this simple and this understandable and are willing to make the tradeoffs to get there, or we want to stick with the status quo . Overwhelmingly complex tax code, who no one knows how provisions are applied. We are proposing a gamechanging approach how we address that. For many families, that Home Mortgage deduction is something they count on. So that is why it will stay were proposing to you to keep it within the tax code. For real estate or any industry, an economy growing at better than 3 or closer to 4 is dramatically better than 1. 5 and 1. 75 weve got today. Lower tax rates allows them to continue to keep money invested locally. The ability to buy those new buildings, equipment, software the ability to not just grow the , economy but productivity and wages for workers is awfully important whether youre in commercial real estate or that donut shop owner. I keep coming back to that. So were hoping and asking that every industry take a look at the entire blueprint, including the provisions that change that this economy in a very positive way and look at the impact it has on the industry. We want that feedback. Were looking to improve and make this better at every step so engage with us. , ill finish with this. We can do this. Its been 30 years. I think the biggest challenge the tax reform is most americans have given up hope it will ever happen. Whats occurring today is what is what occurred for president reagan. Three major changes happening in america today. One, as with president reagans reform, the American Public was sick of the tax code. Too complex, too costly, loopholes for everybody, headaches for them, they had enough. Thats where were at today. Secondly, they were bold ideas on tax reform by law makers. And others. Then it was the jack kempe and bill bradley. Today weve got fair tax, flat tax, abc tax, we have provisions, smart ideas on tax reform. We have the same dynamic. Third dynamic then, we had a president willing to lead on tax reform. Today we have a new president coming into office willing to lead on tax reform. Those dynamics that existed for the 1986 reforms have reoccurred again in a major way. This is a unique opportunity for us to do what most americans have given up hope will ever happen. Its a dramatic opportunity to leap frog america back in the most competitive place on the planet to create that new job. We are determined to deliver on that. So thank you very much for having me here today. [applause] if our panel would like to join us here on the stage, well continue this discussion. And i will turn the program over to my colleague david burton. When we are talking congress, i always want to call you dan burton for some reason. Excuse me if i slip into that. David burton serves as our senior fellow in thomas a. Rowe institute for Economic Policy studies and he will lead the , rest of this discussion. David . David its my pleasure to introduce three very high quality panelists. Ive asked them to each speak for about 10 minutes, and then well have a question and answer session and a discussion. Were going to go first with jason, then steve benton, then dan mitchell. Jason is a Senior Research fellow at the mercada center at George Mason University and teaches economics at the Johns Hopkins and virginia tech. Georgetown, if i remember correctly. He is a former acting assistant commissioner at Social Security administration and chief economist there. Served as joint Economic Committee as an economist and is a very fine Public Finance economist working both in tax policy and entitlements. Stephen is a senior fellow at the Tax Foundation. He went to the university of chicago as did i, but steve unlike me actually learned something while he was there. He served in the reagan treasury, was at the institute for research on economics of taxation for many years, and after norm died served as its president. He is an extremely fine tax economist and he and his , colleagues and foundation put together computable tax policy model there that is second to none, actually probably more , better, its the very best in the United States. Dan mitchell is a senior fellow at the cato institute. He is, when advocating for tax reforms, fiscal sanity, he doesnt know the meaning of the word fear, but in some respects, that should be unsurprising because there are lots of words dan doesnt know the meaning of. [laughter] you can see why i come here all the time. I get nothing but praise. Dan worked for senator packwood who was chairman of the finance committee during the 1986 tax reform act, the last time we got substantial positive tax reform done. He once upon a time worked here at the Heritage Foundation. Its my understanding before i was here. Its my understanding dan here people have since repressed their memories of his stay here. In any event we have a very fine , panel. Before we get to that, i want to take two or three minutes and discuss tax reform, the opportunity we have to get something very positive done for the American People and a few thoughts about what that might be. Its well established that if youre trying to create Economic Growth and opportunity you want to reduce marginal tax rates and move towards a consumption tax base. In price theory or micro economic terms that means that you should reduce marginal tax rates and move to a tax base so you reduce what economists who would call dead weight loss or excess burden. That is the lost economic output because of the dissonant effects of tax policy. This is something anybody whos had the joys of Introductory Price theory can do. The most important thing to remember about that is that the benefit of reducing marginal tax rates increases with the square of the tax rate reduction and the converse is also true, the economic losses increase with the square of the increase in the tax rate. Optimal tax theory leads to the same results. If you look at optimal tax literature going back and its analysis of intertemporal choices, it tells you that you want to have a consumption base which most major tax reform , proposals lead you to. The finance literature leads to the same conclusion. If you want to have a tax system thats neutral with respect to all factors of production, you move to a consumption base, the income tax double, trouble and sometimes quadruple taxes. Capital and therefore leads to an inefficient, unproductive tax system. We want to eliminate tax preferences. Why . Theres two basic tax preferences. Tax preferences for various producers distort the economy and lead to an inefficient production process and inefficient noneconomic choices by producers. What economist would say is that it shrinks the production possibilities frontier. On the consumer side when you start altering peoples choices for comparable reasons, you get an inefficient ability of the economy to satisfy consumer wants. You want to have a tax system that taxes all production once that doesnt double, trouble or quadruple tax capital. We have the opportunity now, i believe, to achieve a substantial move toward those basic criteria what is good tax reform. Chairman bradys proposal, which is being fleshed out as we speak, is an extremely positive step towards lower marginal tax rates and a tax base that no longer double or triple taxes capital income. Similarly, the trump proposal reduces marginal rates dramatically and makes positive steps on the tax base side. So i think we have the best opportunity and quite literally three decades to get a very positive, progrowth tax reform done. Tax reform has the potential, if its done truly correctly of as much as increasing gdp by 15 over a decade. This will lead to an extraordinarily positive economy in which wages increase and incomes grow and opportunities are once again available to the American People. With that, ill turn it over to jason fichtner. Dr. Fichtner do you want us to sit or stand up there . Dr. Burton it is up to you. What do you want to do . Majority rules. Stay here. Nice and easy. Dr. Fichtner good morning, everyone. Thanks for coming today. Im sure most people going up to the election probably thought that Hillary Clinton was going to win the election, be fighting the same tax battle weve been fighting the last eight years. I made many vacation plans which we now have to cancel. The tradeoffs we make for another chance to have good tax policy. Lets just start with the basic for a moment about what any tax reform proposal the next congress should address by making three points first. First of all, the United States tax code severely distorts market decisions and allocation of resources. It impedes potential Economic Growth and potential tax revenue. Lets make no mistake, it is in need of reform. We must do this and the time is now. Second, economists generally prefer a Broader Tax Base with lower marginal rates and bradys plan does that. As does president elect trumps plan. The tax rates that drive the decision at the margin of what to do next, more work, more saving, more investment, plant , labor, equipment, intellectual property, more research and development, a broader base is more efficient because youre not treating some forms of income or expenses differently from others and creating a bias. I say economists generally prefer a Broader Tax Base, but basebroadening shouldnt be traded off for other provisions in a vain attempt to achieve revenue neutrality that would raise the cost of capital and undo all the benefits of lower marginal tax rates on businesses. For example we dont want to , increase the length of appreciation schedules. I was pleased to see both chairman bradys plan and president elect trumps plans have expensing to get rid of it altogether. Many previous discussions we had in the past years is trying to figure out how to do lower rates extending the appreciation schedules. Thats not the way to go. Focusing on the right policy provisions brings in my third point, which is provisions that tinker around the edges like patent box, innovation box, antibase erosion and shifting positions will only exacerbate existing problems that are already evident with our current Corporate Tax code. There is an old saying among tax economists, the road to tax hell complexity is paved with good intentions. Chairman brady made a good point of pointing out that he really wants to broaden the base and lower the rates. Lowering the rates are very important. You can put it on a post card. You want to add all these extra provisions people want as their favorites, then you have got to raise the tax rates back up again. That distorts decisions and economic behavior. You have to make up revenue somewhere. We have tradeoffs to make. Lets avoid complexity and keep it simple. Chairman brady does that. We need to focus on the causes of the policy problems, not just the symptoms. Again, efforts to attempt to treat the symptoms and not the causes, efforts that tinker around the edges are doomed to fail and only exacerbate the existing problems and further the complexity and create equityowned businesses using the tax code to pick winners and losers. Absent tax reforms, u. S. Competitiveness will continue to languish, and action will create troublesome results. A further loss of american jobs, sale of u. S. Companies to foreign multinationals, a further erosion of the Corporate Tax base, and a continuation of the harmful tax policies biased against savings, investment, job creation, and Economic Growth. The United States tax code currently distorts market decisions in the allocation of resources. The tax code hampers job creation, impedes growth and tax policy, and one thing we keep this discussion going and we talked this morning and also with the discussion on the brady and trump plans, please keep in mind that only people pay taxes. Corporations dont pay taxes. They are legal constructs with a statutory responsibility of remitting taxes, but the burden of paying taxes fall on people. Either workers, capital, or consumers. Too often, we hear opposition to tax reform by saying its a cut on business. Cuts taxes for businesses not people. Thats not true. Businesses are made up of people. The ultimate burden of taxes fall on people. We are cutting business taxes, we are cutting taxes on labor, cutting taxes on savings. Thats important. Many developed countries are reducing their tax rates. We have been doing the opposite recently. Now there is a chance to do actually do something and be more competitive. Beginning next year, finally well have both a new president and Congress Serious about tax reform. Thats why a lot of us are so excited. Exhausted Economic Research proves most basic effect, the more you tax capital or labor, the less you get of it. It also makes clear that incentives matter. Successful tax reform will lower tax rates. One thing we should not do, which i think is off the table going into next year, not raise tax rates. The United States Corporate Tax rate is one of the highest in the industrialized world. This now increases business flight to lower tax countries, taking their job, money, and tax dollars with them. While its not going to solve all our problems, one of the biggest we have is lower the tax rate on the corporate side individual. Lowering the Corporate Tax rate alone gives so many incentives to move businesses and jobs overseas. When we talk about efficiency, its important income be taxed once and only once. There is much concern those who report significant earnings pay a lower tax rate than those with ordinary income. Again, this fails to accurately reflect the tax that taxed first at the corporate level then the individual level. So keep in mind the incentives of the tax burden. My two colleagues will get into that specifically. Policymakers need not fly blind when it comes to defining the principles and goals key to a successful revenue system. Economic Research Suggests a successful revenue system should include the following. It should be simple. Its hard to understand that, but we have a very complex code that makes it difficult and costly to comply with. It also makes it easier to scam. Congress should make the tax code as simple and transparent as possible to increase compliance and reduce compliance costs. It should be equitable. Chairman brady talked about it , the idea of being fair. These policies result in immeasurable unintended consequences. While fairness is subjective, tax fairness would reduce the number of provisions in the tax code that favor one group or Economic Activity over the other. The tax code should be efficient because the tax code alters market decisions in such areas as work, savings, investment, and job creation and impedes Economic Growth and tax revenue. An efficient tax system must provide sufficient revenue to fund the Government Services but minimal impact on changing tax payer behavior. It also should be predictable. There are a lot of questions that use reconciliation, which would allow for a 10year window. Negative effects are not just from what it does today but what , it may do in the future. Such uncertainty deters Economic Growth, and environment conducive to growth requires the tax code provides near and longterm predictability. The more we can do that locks benefits into the tax code forever, the better off well be. To sum up and conclude, there is a broad consensus across Economic Research as to which policies are most likely to provide growth and revenues and which are likely to fail. Lower rates. Again, Exhaustive Research has repeatedly proved the most basic point the more you tax something, the less you get. If you want more labor, work, savings more investing, more job , creation, tax them less. Broaden the base and eliminate loopholes. One of the keys to successful fiscal reform is move away from a spending system that depends upon easily manipulated tax system. Tax reform should have lower rates, broaden the base, and close loopholes and this leads to added employment and most this will lead to greaternues. Economic growth and most likely increase revenues. We should not have double taxation. Fortunately secretary clinton , the plans provided by chairman brady and present electron follow president elect trump follow this. Thank you. I was very impressed by chairman bradys remarks. What i would like to go through today is innocence what is wrong with the Current System and then the Current System to an ideal system and then look at how the brady plan moves in that direction to a considerable extent. Many people say, what do you mean, i your income with no deductions and everything is treated evenly. The object was to redistribute wealth. You would be treating consumption items neutrally, but it would be penalizing taster savings for future consumption, and that is the problem we face. There we go. If you are in your income and pay tax on it, you can buy a jar of Peanut Butter and sit at home eating Peanut Butter sandwiches. We do not tax you again. Taxrally we do not aftertax income when you go out and consume it. But if you buy a bond to my future, payments in the we tax the dividend. That is the second layer of taxes. The basic bias against savings. The next step is to put a cap on distributions even before you get them. That is the third layer of tax that is not imposed on consumption. So, that is the fourth layer of tax. The next problem with the tax system is they do not even measure income correctly to begin with. If youre a business and you buy a 100 machine, you spent 100, but we dont let you write it off right away. We make you stretch it out over many, many years. If there is a nonzero cost for the value of is, andhich there inflation, that right off is not worth the whole 100. And you are overstating your income the entire time. That means the tax rate is actually higher than it appears to be. And finally, we have the problem hasrying to tax income that been taxed abroad and we have a very complicated foreign tax credit to avoid the double taxation, which does not always work. It is because of these problems many people have researched how gether a consumption tax that can be progressive, but biasnot have this added against savings and investment. What would that look like . Youd have to do something about the double taxation of savings. You would tax either the savings upfront and not the returns, which we do with roth iras and municipal bonds, or you would put the tax on the income, you would not put the tax on the income if you put it into saving, and thats a regular ira or pension or 401k and then tax it when you take it out. But all savings would get that treatment, not just the limited amount you have to take out by a certain time. No, all savings would get that treatment. The next step, businesses we have to start taxing the corporate earnings. Businesses would get dividends or some way of integrating the either the business tax or the individual level, but not both. Of the have to get rid estate tax. Has paid tax, either when you first earned it and saved it or put it in investment and it earned more income, it was taxed again. Even in an ira where you postponed the tax on the saving, eir pays tax on it. Always double taxation for the estate tax. Next, you need to get rid of that long depreciation life and create expensing so people get to deduct the full value of what they spent on the machine. Not just some reduced value. Finally, we should have a territorial taxes to mike most of our trading partners. Where earned abroad foreign governments provided the water, sewer, police protection, taxed over there, not text year. We do not start getting into each others sandboxes and trying to grab each others toys. Thats not the right way to do it with a global tax system. , with all of that in mind, lets take a look at how the. Ouse blueprints stacks up it reduces tax rates for individuals and businesses. This partially reduces taxes at the business level and the dividends on Capital Gains. It does not eliminate one or the other. You still have the double tax, but the rates on both are lower. So theres less of a double tax system. In the process, they do eliminate the deductibility of interest while continuing to tax it at the recipient for level. The right way to tax interest is either to deduct the interest and tax the recipient or not deduct the interest and not tax the recipient. They are continuing to tax the recipient, which is a mistake. Although at a half. There is some problem with that. The senate has an interesting proposal to eliminate the double taxation of corporate income. The dividend is paid out as the doctor will, but theres a withholding tax that the recipient can claim. You can do something similar for interest and really solve that problem. I think that is something that can be worked out, but both methods deal with a very large amount of additional income. Many of the interest recipients are tax exempt. The plan to end the estate tax and the death tax and the gift tax i believe that is one of the key points and moving toward a neutral tax system. It adopts expensing does the other key point on the business side are moving toward a neutral tax system. It adopts the territorial structure and neutral tax system would have an in that chit in the bias against producing here and selling abroad. These are big improvements. I give it four out of five stars. I have to tell you, its much better than what was done in 1986. In 1986, we undid a lot of the cuts that were in effect in 1981. 86 actually moved toward this pure income tax with longer asset lives, got rid of the investment tax credit, made it harder to use iras and pensions, damaged real estate, not messing with the depreciation allowances. It did lower the corporate rates, but the other features you lowereat, when the rates, you did not make up for. That was a move back to the peer income tax. This is a move in the general direction of a neutral tax where saving and investment are dealt with on par with consumption and that bias is largely eliminated. And why do you want to do it . Because with the bias as much as the old people back there when they wanted to redistribute wealth that they were helping the poor there are fewer machines bought, fewer farms operating, fewer mines operating, factories are fewer with older machines and the workforce is less productive and the wages are depressed. This sort of plan moving in this direction raises pretax wages and thats where the big gains to the workforce come from, not just from the taxcut. When you run it through our model and calculate how much Additional Capital would be formed and how much wages would go up, we get very dramatic results. Doesplan, even though it not go completely toward a neutral base is so far along that line a gives you about a 9 in gdp. Almost 8 larger. There will be a couple percent more people working. The total increase in the economy of 9 will he split between higher wages per worker and more workers working. Youre a big improvement on the wage earnings. Almost 4. 2 cost of trillion would be offset and over a decade we would only be losing about 190 billion, which is peanuts. And then further out you get even more revenue coming in. So people at a sense over that 10 years, the government will collect 45 trillion. So, that static loss should be looked at in that context. Entin yes, theres him is no loss over the 10year window and there are improvements further out. If you are lowering the tax rates on noncorporate business, on Capital Gains and dividends, a lot of it goes to the top, but if you factor in wage growth, it looks like a much more even distribution. The total aftertax income we project would be 8. 7 higher on average. 9. 3 s between 8. 4 and higher for the bottom 99 of the population and it would be about 13 higher than the top 13 . Top arebenefits for the huge and the benefits for the labor force are huge and thats what you want to do this kind of reform. Thank you. Thank you, steve. Dr. Mitchell. Dr. Mitchell all right, steve, can you pass me the clicker . David, digital notice i dug out my old heritage tie from did you notice i dug out my old heritage die from my closet. I did not want to persecute victimless crimes. I did not want im joking. I love my friends at heritage. Its good to be back here. Goodd to do very presentations from jason and steve. I want to touch on a few additional issues so we can wrap this thing up, assuming i can figure out how to work the thing. We have heard the principles of good tax policy. So, i probably do not need to reiterate that. But i want to add one thing that i think jason and steve and david would all agree with. You cant have good tax policy if you dont control the growth of Government Spending. I have a lot of faith, given the the house is none for last several years in their budget resolutions that the house is serious about controlling the growth of Government Spending and therefore enabling and creating breathing room to do good tax policy. Im not quite sure what we are going to see out of the new president. The new president has said things that make me worry he might not want to reform entitlements and if we dont reform entitlements, i worry we will never have the chance to have good, sustainable longrun tax policy. So, even though its not technically a principle of tax policy, if we dont control Government Spending, we are never going to get good tax policy. We are never going to achieve those things that all of the other panelists have already talked about. But in terms of those things the other panelists have talked about, let me reinforce a couple points. Understand actually that tax rates matter when they want to. They say, oh, we need higher taxes on tobacco and alcohol because we want people to smoke less. Are right. As a libertarian, i dont think we should be trying to control peoples pipe private lives, but i give them an a plus for economics. But the same politicians will turn around and say, oh, it doesnt matter if you have high tax rates on entrepreneurs, investments. Of course it matters. People respond to incentives. We want to have the tax rates on production of behavior productive behavior as low as possible. Double taxation this is where i thought chairman brady took the good work of former chairman camp and put together a tax reform package and turbocharged it by breaking the barriers that he imposed on himself and came up with a plan that is even better. , and thisy thing really echoes what steve in was talking about, is double taxation. This across to politicians. I sometimes ask them if you had an Apple Orchard that shes been all those years planting the trees, tending the trees, keeping away past, proving the trees, and finally your apple trees are mature, you have a good crop of apples, its the fall, youre ready to harvest the apples. What is the best way to harvest the apples . Do you pick them from the tree or do you chop . Own a tree even politicians realize, wait, it does not make sense to chop down the tree because i would not have apples next year. But thats exactly what we do in double,good with the triple, and quadruple taxing of saving and investing. Were not confiscating, but in this example, the tree is the capital. The apples are the income. Yes, tax the apples if you want, at a low rate and things like that. Do not soft branches of the tree. It means you have fewer apples next year. That is what steve was talking about when he is referencing the fact that we are going to lower peoples income and there will be less income in the future for ordinary workers if we destroy capital in our economy with that tax policy. General,ood news is in trump is pushing in that direction. There is no question brady is pushing in that direction. Theres even some movement on the senate side where normally, people always joke that is where good ideas go to die. Theres a lot of reason for optimism. I guess in my last couple of minutes i want to raise something that we all need to think about as people who are friendly to the idea of tax reform, and that is this destinationbased part of the tax reform plan. Chart i havettle the flat tax as the gold standard. Low rate. No double taxation. Then i compare it to trump and i canare it to brady and you see both trump and brady are moving significantly in the right direction. Im appear purist, but im not under any delusions we will get perfection out of the political system. When i am giving them basically and bpluses, that is a tremendous movement in the right direction. But we have political risks. What the house plan is doing is really radically different. It might turn out to be acceptable, but we are obligated to give some serious thought , becauset this means you are exempting all export related income. You are not allowing any deduction for foreign produced input. Is that protectionist or not . Would be compliant with the wto . For those of us with gray hair, ruledember when the wto against provisions of our tax code and we eventually were forced to change it. Is this a path under wto even though it is a Corporate Tax structure . We have to think about these issues. What worries me the one thing i really fear for fiscal policy is having a value added tax on current income tax and in effect, the destinationbased order adjustable cash flow tax you have an bradys plan is not that, but its not that because wages are did. But if the wto rules against it, i worry with politicians in washington, especially if they are not as good as the ones we ho
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