Transcripts For CSPAN2 Ways And Means Subcommittee Considers Tax Reform 20170823

[inaudible conversations] spiritous subcommittee would come to order on how will simplify the broken tax code before we get started with Opening Statements about 80 yield to the chairman brady for the distinguished witness before us today. They give for your leadership of tax policy that such an important time in americas history and for hearings like this to have the conversation with a more progrowth tax system. Thanks to the witnesses of a special welcome to our friend former leader of this committee and a longtime mentor to me personally. Thanks for being here to share your insight. I would like to take a moment for the legacy at the ways and Means Committee actually serving on the committee 20 years chairman of the 1995. And the strong voice of 1986 lower rates for americans with complexity with those tax figures and to bring the same passion and determination that the tax code works for the American People and not against them. And to do those same taxes year after year to know intimately the complexity and the cost of a complicated code. Laying the foundation for the pro growth that is a source of inspiration and as chairman archer retired to be selected on ways and means and to welcome you back to the committee with your decades of Public Service bin thank you for your service and were excited for your testimony. Thank you for that welcome and roy the job you are doing. Think about it on this side so and i can click up the flight tool in chooses seats i can have a charge of my credit card and get a boarding pass with a twinkle of the i and if i have 10 seconds of that spinning around my attitude is what loser makes this . It is ridiculous period we have an expectation of these and simplicity that is basically the norm. Contrast that with our tax code which is so complicated every year the majority of taxpayers cannot figure out how much money they owe by themselves it has grown so bloated to the point it is treating productivity in giving a headache to every taxpayer. Good news. Nobody likes it or defense it nobody says i love that Internal Revenue code dont make changes. We have deep divisions among us but it is so interesting nobody is defending that status quo. Better news. So dramatically to simplify the code. Taxpayers according to that proposal. Seven pooley 7 higher wages every year millions of americans spend hours to figure out americans bin 2. 6 billion hours trying to calculate what they need to pay of calcium translating over affirmative billion dollars of lost productivity witness should be so easy that nine out of 10 people say how much they should pay the government with a household if paying their taxes and think of my constituents sitting at the table trying to figure out what they owe looking at the 1040 to figure out their deductions and deduct enough to itemize or the standard . Qualified for the additional standard . Or the personal exemption for the Child Tax Credit that when they are really confused they can read the whole full i. R. A. Skied for individuals on page two under six it starts off with how to begin your taxes. Fulltime they think if they have meyer if they could hire somebody than they pay less because for more than 30 years the tax code has not been updated and is polluting with special interest canal contains 80 items. Clearly it is inherently unfair because they doha more about the tax code. Those filing as simple as a postcard and no more uncertainty youre worrying the government will come after you to be in a hard copy form for every taxpayer to use. First proposed to eliminate all but a few deductions into those seven brackets to lower the tax rate for all americans in the process and repair together the standard deduction and personal exemption and use the savings from eliminating those deductions to the standard deduction and 95 percent of americans will use that. Finally combine the Child Tax Credit with personal exemption and with these changes americans will no longer have to worry if they are wealthy enough to get a better deal. As a committee we have a choice to grow the economy to create a fair system ameritech can trust. With this in mind i am pleased to welcome our menaces i am pleased to hear your testimony working with colleagues on both sides of the aisle with the tax code that helps all americans including my constituents. Now for the purpose of his Opening Statement i would recognize the Ranking Member. Welcome to all witnesses to consider the impact of proposed tax reform this is the first consideration of this matter since we passed the House Republican blueprint to coincide with what appears to be the demise of the first republican tax cut that large the masqueraded as a whole preform bill. Is important to consider how that proposes individual taxpayers from the more than 400 billion of tax breaks for individuals that is proposed, those making more than 1 million each year will have pocketed in average of 57,000 a piece with a small tax cuts middleclass believes will have been wiped out by health care cost. Also how the bill was presented into hotel lessons have been learned from the approach of interlocking and key in the capital with that single administrative official to testify about the bill to be held accountable when they were all denied there was some concern is that would be presented for a hearing asking chairman orrin hatch of the eric be a hearing and tax legislation not all written behind closed doors i will submit for the record in exchange with senator rick telesco and i hope we will not see the same thing happen in senator hatch will say this is a more open process and to simplify the tax code many of those additions in recent years with the special advantages were offered to some adding complexity to the system i have offered legislation to consolidate into the expanded American Opportunity tax credit to make it easier for young people to Access College and use the same credit for job training as so Many Americans tried to seek new opportunities to make a possible for them to provide for their family in a more adequate way. And to get the full benefit of American Opportunity tax credit. And considering a budget with the social Services Including Funds Available for telegrams. And for those who have no dependent children and an idea that speaker wright and has endorsed. Now our colleague has offered a bill to expand the Child Tax Credit. I the each of these a potential for discussion but not if only to be off the table and it is important to apply after president trumps appointees secretary of the treasury in not seeking any that tax breaks and while we sympathize that there would not be a net tax cut. But i would like to see is follow that rule is we consider simplicity and fairness. And with that not educational opportunity. Let me just comment briefly. And but failure looks like with nancy pelosi of speaker of the house says pass the bill to know what is in a. And with that lack of cohesiveness when we were considering the Health Care Bill and it was started by the senior republicans. When will i hear about the republican amendments . That is a line from a gospel song. And then we never got to those. Having the fourth hearing on the blueprint with a lot of discussion and with the blueprint now is the perfect time touche transition. And then chairman brady already introduced on ways and means. And how to craft legislation and then we welcome your testimony. And with electronic revenue. The with that fiduciary plan advisers and Eric Rodriquez with the advocacy of legislation. And i will be gentle. Is truly an honor mr. Chairman to be in this room again. Have is that . I pushed the button i dont know what else to do. Issing said it is better. I will get closer. As chairman brady said with great aberration in with these concerns today. And they exist today and from 25 years tonight. But in to alter the course of the country but to rise to the occasion to complete complete those fundamental tax reform. But to change radically and then for americans end is in many ways much more difficult answer the more challenging. In those complications have increased. And with those 50,000 changes in the tax code and with those individuals and that figure is probably out of date. So also into chairman brady for taking the lead. And in terms of having a tax code with those marketplaces in the world. And all we ever want for this country is a very vintage. And hopefully get what we had with our tax code 30 years ago but we have lost that. Into ruby a clearing competitive lead. En to be truly comprehensive document but with bad bill introduced several years ago with chairman camps foundations have been made better overdue with those twists and turns of of legislative process to develop a comprehensive document that will clearly be the new starting point not only did i do my own federal tax return but i did that with a pencil and a yellow writing tablet and not a computer. Believe me it was very frustrating but the staff of the joint committee i did that the related to the Tax Deductions there was no form. So i contacted the committee in the said we cannot give you a form but we can tell you how to prepare by he and and i think they will take it. That is terrible tax code. So with the political effort needed to achieve but there is a support group of a man Many Americans for every special provision that is in the code that they must counteract to finally reach your goal. Until recently expiring tax provisions required a new legislature and having to address this problem it was able to make tax reform possible. I urge you to make is the hallmark of any tax legislation. The American Public needs to plan to make their Financial Decisions in the environment where does not change every year. That makes it extremely difficult. I have always describe our tax code and if you are not lawyers so whenever you provide like of magnet will draw in all kinds of complications it will be very difficult to resist and that is what we have today. Saddam eating every incometax code and i will add live just very quickly to tell you i lost confidence in being able to have an effective and simple income tax at the end of the 86 of the rations. It is a matter of record that we should abolish the entire code. And replace it with the consumption tax those that do not have to deal of all with the irs and to me that would be very attractive but that is a big step that is beyond where you can go. I could not make that happen so im sure you can not. But certainly we need to find a better way than the current incometax. I appreciate the unique opportunity to return to this hallowed environment the most beautiful of ruth in the capital of the United States to be able to address you. I dont have a magic answer for you. I wish i did berkowitz is extremely complicated i am glad frankly europe there today and i am not. Thank you. Any way that i can be helpful. Mr. Chairman and Ranking Members of a him honored to testify on electronic communication advancement. Launched in 1994 at the request of the irs provide a means of collective communication and coordination across the tax ecosystem to a fancy electronic tax filing and attacks administration. Members are present a wide diversity of participants from tax software and Technology Firms to storefront changes the System Integrators and financialservices companies were proud to have been a part of the National Adoption of the electronic tax filing more than two decades. The 1998 restructuring in reform act adopted a Public Policy objective of a the e file and adoption by taxpayers that is efficient reduces government operating costs and improves accuracy. Today almost 90 percent of all individual tax returns are electronically filed. That accomplishment is a direct outcome of Publicprivate Partnership in technology innovation. The innovation in that process is not the only thing that has changed over the last 30 years but the tax code has changed. So with those characteristics of the Small Business has changed and evolved in that would empower individuals and Small Businesses more recently recently to understand their own taxation and that engagement of affairs leading to better Financial Decisions and their families. Private Sector Development has sharply reduced the pain and complexity of Tax Compliance while bringing inaccurate preparation with the economic goal reached for all or they are assisted by professional negative professional tax practitioners privatesector innovation has taken complexity of the tax code to simplify for the tax payer. They have dated driven and simplified it to allow direct importation of Financial Data in to a tax returns from the original data source. These Technological Innovations have made compliance faster and easier and more accurate. However simplification reform streamlining the tax code itself with greater simplicity and ease of compliance is the right policy direction we believe simplification reform strategy is Common Sense Solutions so there are unique tour is like adjusted gross income all of which have different and conflicting definitions of the code and. Using universal definitions go long way toward easing and understanding. Those for retirement and education for what choice is our best for them in their financial future for the commercial sector knows that natural response of consumers to the multiplicity of options can lead to doing nothing at all. Industry works to simplify this over decades to simplify the underlying tax code can make of big difference to help taxpayers make better decisions. In the same way Electronic Filing was Publicprivate Partnership in 2002 president bush wanted to ensure Free Tax Services were available to reduce the compliance burden that policy led to creation in 2003 and of the irs for a file with no cost to the government or the taxpayer with the result over the last 50 years as a donation of more than 50 million free tax returns from the american taxpayers of modest means operating under those expanded requirements while ensuring competition is Consumer Choice that kind of Publicprivate Partnership has saved public funds and taxpayer compliance cost more recently the Publicprivate Partnership between the irs in the state department of revenue in private sector to fight cyberfried broad that is now under way for more than two years the irs has reported it has slashed case is of Identity Theft refund fraud by more than 50 taking the fight to the next level somebody has created information sharing as existing in the Financial Services sector has the next day that pays of the Publicprivate Partnership long term as policymakers contemplate simplification is important with these divisions of labor for go over the last several years there has been much discussion about the simplified postcard tax return. We would observe in todays environment talking about the electronic post card it has moved well beyond paper to fully benefit from the security safeguard already adopted by the irs to protect the taxpayer and the integrity of the system. I think we can get to the rest of your testimony. They give to the Ranking Member and the subcommittee for the opportunity to speak with you about the importance of tax incentives for Retirement Savings. And the Practice Leader and cofounder of the fiduciary advisers independently owned provider and theyre hardworking employees. I bring more than 20 years of experience i advised 140 Retirement Plans covering approximately 50,000 employees and 2. 4 billion from Retirement Savings. I also served as Vice President National Association of advisers. The voice of the Retirement Plan Advisory Committee part of the American Retirement association. The message i want to convey today is tax incentives are working very well for good savings behavior for tens of millions of American Workers. Seventyfive of households have access to workplace Retirement Plan and 82 are participating. The most important factor to determine workers save enough for retirement is access to a workplace Retirement Plan. Modern workers are 15 times more likely to save if they have a plan that workforces to those of the up by air a half left on their own. Those that freeze retirement contributions in minutes will discourage Small Businesses from offering Retirement Plans. I recommend to all my clients the offer pretax contribution and that would be beneficial for those lower wage earners. We have even started discussing with our clients the options of an automatic enrollment however it policy and with more reliance on the rocks contribution making other changes to those tax incentive to expand coverage expanding coverage is critical to building Retirement Security for the middle class. I support proposals such as increasing the Retirement Plan start of tax credit and adding a credit to encourage automatic enrollment. In addition i support the pooling of unrelated employers and 20 plan and ids given by a buchanan to produce economies of scale to lower the employer participant cost which will boost coverage. The most significant reduction is associated with what castoff during a job change. I have helped hundreds of participants how to figure out there will rolling over their savings into a new plan. To address this challenge is to pour recommendations of the National Retirement Clearing House to facilitate consolidation of retirement accounts when employees change jobs. In addition the committee should consider the act which permits individuals to continue to repay the plan alone if they become unemployed or the Retirement Plan is terminated. Medicare eligible truck couple at age 65 will need at least 260,000 in savings for health care in retirement. Health care savings accounts of the best way to save for this expense so the proposed giving them the option to add that hsh feature to the 401k as Congress Still lolling 401k providers to add the irate in 2001. Integrating a gsa in this fashion has a benefit to provide access to lowercost investment offered in the 41k and soliciting advice for retirement needs. It with those on that pass through in come. With the smallbusiness Retirement Plan it is critical those contributions by shareholders or partners of those pass through entities for only against the incumbent is classified as reasonable compensation. Offering a Retirement Plan is preserved when related to the deduction compared to what they will pay when they retire thank you for the opportunity to participate in this discussion and ill be happy to answer any questions. I want to recall as a congressman also look congresswomans sanchez for providing leadership on these issues. Fake you for inviting me those of you whod dont know we have a new name. Am working on Economic Security and this topic is important and as you know a the tax code have considerable influence and a lot has changed so for instance at that time they represented just 8 56 million strong and growing throughout the country. But at the same time try says likely to be in poverty they and their white peers in the income gap remains quite wide. The average family of latino and 1 for every 10 of the white person household. And steve doing to improve or worsen for these households. So millenials are very important and how tax policy affects them and influence is the economic behavior for the longterm viability and prosperity. And with that perspective. To find important defense with Public Education and for those that we all enjoy a. But only if they are intentional and with those workingclass and individuals. Those that favored tax incentives or just make ends meet. And to start with the revenue that is adequate and that tax reforms are equitable recent proposals threaten to weaken the taxpayers of unfair of the benefit as it stands at roughly 700 billion tax expenditures of the rich get richer retargeted deductions those that seem to inflate those benefits are very concerning to us. And to pray for those proposed tax breaks the trump plan would result in over 5 trillion at least as a way to pay for these breaks in the budget for those crucial programs. They would provide massive tax breaks they have no inheritance tax generous pass through rates with the old churro wealthy individuals to those workingclass families and that should do more for the working class tax paper payer and it must be transparent in this city is more important than ever as the face changes most of the states are majority minority. There with those shared values of tax and spending policies to establish a modernized system so to raise sufficient revenue to build a Strong Economy to be sure that they pay their fair share including the corporations and to promote economic mobility with the working families and whistled a tax reform is needed for all americans including latinos. Initiative make the taxpayers of path to reform should be a bipartisan process from all walks of life fake you for sharing these views and look forward to your question. The chairman has been very gracious to allow all members of the panel to ask those questions i appreciate that consideration in things to all of witnesses for being here and you worked with my predecessor when jennifer was a member of commerce and i was honored to follow in her footsteps as i am sure you were honored to work with her. That we are at a time in history to have the opportunity to make a difference in the lives of American People all taxpaying citizens of hardworking americans but the complexity of the tax code of the least 15,000 changes in state to 86 and with that rational approach and to simplify a this certainty to help americans invest and grow and higher across the country. So what does is permanence me for the average American Worker . They look at the tax code to be so complicated they have not seen this so many years what does that mean for the American People . With that economic status in to depend upon and it is very, very bad. And you should be able to plan your life in to change everything for you. And the individual as to the impact the congressmen, one thing i intended to save my remarks but iran over rand did not get to do was of major failing was the fact there were major changes that were retroactive but to give you one caution do not given a retroactive provision that retroactivity is one of the reasons is that 86 Tax Reform Act and to bring about the demise of thousands of savings and loans to cross the federal government will over 125 billion and that was avoidable if you simply make the changes. Thank you. With this related provision in referring to your testimony allowing private employees to pull together with an with those for their workers. So polling under well negative and related employers would help tremendously i work around the d. C. Area and they dont have the administrative staff to build the complexity when you go to put the plan in place to give the economies of scale so they will have access to a plan that is reasonably priced and i think that makes a big impact. Thanks to each of the eyewitnesses and to agree with you completely of retroactive provisions and we had some included in the first tax bill and while there are some aspects of tax policy a lot to take the opportunity to thank you for your of leadership at the university of texas there isnt a day go by i theyre not in my office and those governmental entities and those nonprofit organizations have that here to each of those shown people to be engaged and Public Service. Were very proud of those archer fellows one is sitting in the back of the room. Going 15 months without hearings with those proposed tax reform for individual taxpayers. But to some time after labor day were about to have a tax reform bill with far reaching implications. I am disappointed the center from america in progress was rejected for this hearing we need to be hearing more and not less. And your testimony is a good example of that. Adjust the issue of retirement you rather first person to testify this year before the committee concerning Retirement Plans. Because our neighbors across america who do not have adequate savings and what changes we need to make to devote one or more hearings to exploit that question and and frankly after looking up the blueprint i am not sure what is proposed retirement and i think there are many within the provincial Services Industry that are not sure either forcing some concern about the changes contemplated by that very vague language. Looking at Retirement Plans is significant because the way the systems are working today 60 percent of american households of those tax benefits and those top income earners get 66 percent but they only have a Social Security check orders of ownership interest with equity in their home unbeaten we need to look at savings in terms of how we reach out to support Small Businesses to offer plans and how this measure affects those individuals is important. Could you comment on the challenges of working families have for comment if we adopt and other bush type tax cut not paid for . It did say big problem with Retirement Savings and opportunities that are not there. I fake we have to find more ways those that are becoming more mobile to save for retirement that is part of the reason why we have the enormous wealth gap across the country because of the way the tax code incentivizes accruing at the top but we do have some great and then part the exploding tax expenditures with dollar budgets to make funding and revenue really inadequate. I appreciate you carrying this having this hearing we hear about International Companies santa rigo de all have Tax Departments that help them pay their taxes figuring out but they owe but falls on local taxpayers and then do that. Sometimes they dont have that advantage. We all agree the current tax code robs them of their most precious commodity which is time. Time could be better spent with families, making business more productive productive, new opportunities i talked to one cpa in south dakota that says a cpa with 33 years of experience i have lots of tax code become more complex making it more costly to comply while Customer Service within the irs has fallen as a result i see a decrease seen confidence tax reform gives us the opportunity to redress these matters and restore faith and confidence and with that burden that it places on them. Chairman alibied to visit with you and think spa of being here to make this a priority with all of your years of service but what have you seen with the erosion of the american confidence . But then in particular about your perspective of permanence . We have people propose costly as tax extenders to put policy in place for a short period of time could you explain a little bit about having permanence in the tax code . I have a strong believer in permanence but i am now wait for everything in my life that i come back five years later they will still be there. That is not how things work but there is no reason the tax code cannot be one that is not forever changing there are changes that will happen and taxes have to be changed as some point we know and as a certainty in life but not where every time you put something in to save for revenue purposes that we will change the of revenue. By taking make a valid point i spent my life in farming and ranching with shortterm tax policy to get the industry off the ground to know when it will sunset. We do see that at a period of time but also starting a business from scratch and running a Family Restaurant and the Insurance Agency if i go to the bank asking for a while they want to know my liabilities and Business Plan it is hard to do that unless you have a permanent tax code. Maybe a role for both in parts of the tax code. Is that the point youre making . Yes. Absolutely. That taxes need to be as simple as possible so your idea to use a postcard survey could fill out on a postcard that has a very attractive appeal but if you can do that i dont know because you have to eliminate an awful lot of deductions with the beginning of my chairmanship of the committee was having a tax code that tried to do everything itself with the American People. I think tax credits are not good and that we can make been happening in society i dont agree with that and i fake that complicates the code to make it difficult for a people to a understand that. They key is to the witness is diabolical disappointed the ted half the year before we had our first hearing with tax reform impacting families and individuals but i am glad we are here. It is impossible for me to address everything that i feel should be a priority so i hit on a few points. I believe that a lasting tax reform needs to be bipartisan and comprehensive that has taken a hold of tax reform lasting tax reform history is not on the side to go alone. It is on the backs of the middleclass to the tune of 1. 3 million for a wealthy household the people i represent in Southern California would receive roughly 0. 70 per day i am sorry that that will not have help those families plan for retirement or take a vacation. Salad makes onethird of the workforce as others across the country many have not even entered the childcare to become some of those largest burdens and challenges that they face one of those principles was the need to support working families and children also poverty. And address those and a meaningful way . Most effective Antipoverty Program is the Child Tax Credit refundable portion 20 million received credits knees are working families raising children so finding ways to with a population of hardworking raising families to have saved for retirement to live the American Dream and the tax code can do that if we can find ways to do that with these elements they care is key there is the number of different ways. That is the tax credit for middle and workingclass families i feel like the rhetoric around e itc is just a handout can you say if why that is the wrong way to characterize . These are all working families working very hard even those accumulated households dont reach that threshold level to pay payroll taxes and sales taxes so the earned Income Credit is an important way that the refunds go to that generate Economic Activity across the country that members represent. Can you tell me the aisle , of our tax code that gives the majority of those tax cut benefits . I mentioned the wealth gap right now is 10 one with increasing incentives from the top of the of weld scott 12 scale and giving those tax breaks to us small number i will read that that increase is those disparities across the board thanks to the panel for your testimony the chairman and serve with my predecessor of course, there was a 30 year gap between his service and Price Service but i am pleased to see chairman archer next month and i will give him your regards. They give far having this hearing as we have discussed the detail the importance of the Playing Field to ensure those businesses that will allow them to compete here at home and i strongly believe the tax code is just as important as this to our companies and some examples for suze alternative minimum tax with a small and amount of people of those tax preferred vehicles but today but instead creates an unnecessary and costly burden of that provision similarly that citizenship based taxation implemented during the of civil war to discourage wealthy americans from fleeing the country and depleting the necessary coffers leading to a record high expatriation with the ability of citizens to compete and amazingly it cost up to 40 percent more to hire american citizens abroad than foreign jurisdictions and to discourage foreign multinationals. So moving to that territorial system so with that blueprint and a necessary part of tax reform may also take advantage to that residency based taxation for individuals these are examples from the individual level to have a fair tax reform plan. So another element so the United States has a high rate of voluntary compliance love individuals filing their tax returns but if that system has gotten more complex than simplifying the tax code and you have any comment on that chairman . Needless to say as i continue to do my own tax return that has its own field for me but and for most individuals one of the Major Concerns that people have but politically it is not simple to get simplification but has been out there living as an attraction for as long as i can remember. When in the end we always seem to make it more complicated because the tax code has been used by so many people said it has been used far too much and i feel that way about the tax credits to me that is not the purpose of the code. It is primarily designed to raise the money to pay the governments bills and not create all these complexities. Thank you. Thanks for holding this hearing. Chairman thanks for your Previous Service and i too want to thank you for bringing up the issue of retroactivity and from a number of times over the years to do that retroactive is a monster for people who use that tax provision and i want to second those comments while bringing up the issue of savings and retirement accounts if we do nothing else but provide a means by which people could save their working for retirement years that would be an excellent outcome. Talking about tax reform one is whatever we do is pay for it we cannot afford to charge our kids or grandkids and i think we have to insist with any reform that we do not just the unpaid tax cut also to focus on middle and workingclass individuals those that have been left behind we need to figure out how we can incentivize being able to get ahead to make more money. One way to do that is to the understand the importance of furthering education with Higher Education and Career Training all that is a value added and the more you have the more you make we need to have them make more money. So i really hope we are able to focus of most types of things. It needs to be about the American People who dont have those people working with them on a daytoday basis were cannot take advantage on the tax code. But mr. Rodriguez and want to followup on what it ms. Sanchez talkedabout because it is my concern paying for what we consume. In the past we have seen this movie before with big tax cuts then pass the bill on to somebody else. So cutting those important aspects of health care to pay for tax cuts or tax reform. So can you tell me no cuts to medicare or medicaid will help workingclass people . We have a more recent example of how this really does work with the enormous pressure to provide Adequate Funding for services and those programs that our important to economic communities to show you how this type of approach and how this is wrongheaded. And to repeal what they have done and that Republican Legislature recognized that they have overrode the governors hand it was devastating. If you look at of budget resolution proposal you can see massive amounts of cuts of 1. 3 trillion of the discretionary programs and you are right to. But i would like to hear from you to set mitt in writing tax reform you think would help middle and workingclass individuals. On my love. Theyve heard the story before but my dad when i was 16 years old. I took my first job at mcdonalds my dad winter all different taxes that can take not my check and said, dont let the tax code change your behavior. You need to save money, and you need to continue to work hard to make more money and get a good job. And today, when i was a realtor mr. Rodriguez, you mention this in a got me thinking again. I was looking at your bio and it was very good but what was amazing to me and i never realize this until i start my own business. The first time in my life that i had to send a check to the irs every quarter which is very different than being a congressman or working for congresswoman or congressman working in a think tank. You put it all on the line when youre actually sending that check to the irs. Whats fascinating is that today you mention pastors. If you are a successful passthrough and no one is going to guarantee that your successful business owner, in america your pain almost 45 of what you make to the federal government. That doesnt include to what you pay to the state income taxes, or what you pay your local Government Income taxes, that doesnt include workers comp. Or anything else that are three levels of government are required of you. So, i take issue with the fact that as a pastor getting a tax cut is not appropriate. I learned that from my immigrant father. Hes worked hard his entire life and is retired now and who always complained about the taxes he paid. With the six grade education is a steelworker never making a lot of money. What great streetsmarts, mr. Chairman. During testimony was fabulous. You wrote about consolidation. You concluded that one does not necessarily equal the other which i thought was interesting. You specifically mention the different kinds of employers saving plan like a for one 4o1k. Ive heard from firefighters and others in a district that in my district in columbus, ohio nationwide insurance is the largest provider for 57 plans of the country. Can you provide details on the different populations that these plans serve and why its important for us in considering tax reform to make sure that we dont throw the baby out with the bathwater and continue to allow for the incentivizing of these plans. Thank you congressman. There is a need out there to have different types of plants. We still have a need to keep and simplify them. But his first answer your question directly as to the different employers that are served by the different plans, it depends on what type of plan they want. If its a small employer they want my institute a simple 4o1k or ira versus the Midsize Companies that mightve for a 1k. The nonprofit world has four oh 3b plans there are different nuances to each of these plans the sulfur the needs of those Different Industries and different groups. We still need to work at simplifying things, but i dont think one plan sells for everyone. Mr. Rodriguez mentioned that we should better target middle and lower income folks for incentives, a group that. What i found in your testimony was fascinating was the largest groups benefiting from 4o1k plans employers, employees who earn less than 50000 per year. In the last administration they work to cap that amount of money that an employee could put in. Could that actually disincentive ice employers from providing the plants and thus benefiting the workers that need . Absolutely. It would have a huge impact if we took away the incentives of Small Businesses offering these plans. They need those incentives to get them to the table to put the plan in place. We have a coverage issue. We dont want to get anything in the way for the Small Business plan to put that out there for their workers. And mr. Chair. Thank you for being with us today. Mr. Rodriguez, who coming here today from a budget markup where weve been debating disastrous cuts to education, infrastructure, workforce training programs, and healthcare. I appreciate the reminder in your testimony that we should remember first and foremost that we need to have the revenues to pay for these basic government functions for growing us strong and a resilient middleclass. Over the years weve moved away from this concept and the code has morphed into something of a monstrosity with layers of which would benefit the wealthiest view while others are left behind in washington. Mr. Rodriguez, the Tax Policy Center estimated that under the republican blueprint the wealthiest would see a taxcut of over a Million Dollars will middleclass families which around 200. The trump plan offers middleclass families one tenth of 1 of the 1. 4 million cut the richest americans could expect to see. The time of my colleagues seem bent on getting education, healthcare and other Critical Resources for working families, do you think that even 200 per family is anywhere near enough to make up for what republicans want to take way in terms of healthcare and Education Resources . Not at all. Its a huge issue. We do a lot of work in job training, education and healthcare. We know theyre great needs and resource needs there. We are very concerned about that. Chairman archer, think you for being with us today. I imagine you know firsthand how elusive comprehensive tax reform can be. I agree with many of the things you said in your testimony that tax reform should not be corporate only. That should be permanent to give people some ability to plan for the future, and that progress is achievable in this congress. There is one word that was absent from your testimony and that word was bipartisanship. I believe without bipartisanship, this committee will never achieve the goals that you outlined and i wondered if you agree with that. I certainly believe its desirable to have bipartisanship, particularly on something as important as fundamental tax reform. It seems to me as with healthcare reform both parties should be a part of it. Otherwise, it seems to me that it is not going to be as longlasting as it should be. And says you know, i am new to the committee but ive done some homework and in the 1986 tax reform process was more expensive than what the committee has done the sheer. The Tax Reform Act was preceded by 30 days of full Committee Hearings on tax reform. Five hearings on the subcommittee and three hearings on an Oversight Committee in 26 days a markup between september 18, 1985 and december 3, 1985. The Senate Finance committee put in the hard work as well. Early 60s a full committee, public hearings and six subCommittee Hearings six days a markup. Thats a far cry from what were hearing now from chairman hatch who just said the finance committee may not have a single hearing attacks are from the sheer. Mr. Chairman, and like to enter into the record the legislative history of the 1986 Tax Reform Act. Without objection, sorted. Chairman archer, do you think the committee in congress as a whole conducted a deliberative summative of issues in the 1980 tax reform . Clearly the 86 tax reform took a lot of time to put together. In the end, to prevail was a very hardhitting pressures from the top on both sides. I was very concerned as i mentioned earlier today with the fact that there is activity in there that was going to undermine the value of real estate. It was put in their to get extra revenue. It disturbed me enough that i wanted to offer a motion to recommit with instructions. Im convinced that i had the votes to beat the bill. If i have been permitted to offer that motion and recommit with instruction. Unfortunately, that i mention there is a lot of pressure from the top the ranking republican in the house was called by the white house and told that he could not let me offer them motion to recommit. Call me into his office and tell me that he was going to have to personally take it away from me. There was not anything i could do. The power was there. It was unprecedented because the ranking republican on the committee was for the bill, so he had taken himself out of the process and i was the second ranking a traditionally initiative been given the motion to commit. So, those things were going on behind the scenes. In addition, you not only had the president who signed on but, you have the chairman of the committee was then a democrat who is totally committed to it. The pressure that he put on in the committee was incredible too. So you have bipartisanship but bipartisanship in my view did not represent the country. Thank you, my time is up. Mr. Chair. Thank mr. Chairman. As i go around my district and talk about tax reform, the thing that i hold up at most of the meetings is this postcard. Believe it or not this postcard is much more popular than the irs code as it exists. People are intrigued by it, i cant say that they read every line of it and make calculations in their head on the spot, but the biggest question i do get in my current district about this postcard is, can i fill the postcard out if i file the alternative minimum tax . And i say, theres not going to be in our plan, theres not going to be an alternative minimum tax. So for a great percentage of people in my district, probably the most frustrating part of the tax code is the fact that they have to figure their taxes twice. They figure the first go around and then they have to go through it again to see if they all this other tax. What kind of affect does that have on taxpayers when they physically usually cannot fill it out simply for that reason. Congressman, i have always been in opposition to the alternative minimum tax created me no sense, as architects policy and in the end have to continue to be in place without change it would have generated more income tax revenue than the regular contacts and to me, that did not make sense. I think youre absolutely right. I hope you can do away with the alternative minimum tax. If you do, youll do a service for the country. Thank you congressman complexity in the tax code comes in many forms. I mentioned before theres half a dozen different definitions of the term dependent. There are more opportunities for simplifying the tax code then probably there would be room for in the eventual tax bill that comes out of congress. Whatever congress decides about a particular provision like the alternative vitamin tax, our point of view is we will as an industry, both technology and practitioners show up and serve to simplify peoples experience. The postcard is something this industry is well prepared to deliver of a taxpayer. We mentioned before it ought to be electronic but an electronic postcard can be a very simplified way of complying. There is a security issue in terms of a piece of paper that goes into the mailbox. But more interesting issue and that is the 98 act that led the way to converting the country to Electronic Filing. In the course of that the irs eliminated from its budget the overwhelming number of paper processing plants, the system of the old days of how paper returns were processed but there is a huge advantage to the country. Putting a paper return into that system and the irs employees with key fields from the return produced about the 20 error rate whether that was the original taxpayer with a keen in of abstracts. Moving to an Electronic Filing system, that dropped to a 1 2 rate. So there is advantage in electronic implementation. Whatever the provisions of the code are that you decide is our policymaker, the ability to simplify the weather an electronic postcard or any other tool available, including for simple return, people can do it now on the phone with a nap, take a picture of a w2 and have a return brought in. The private sector will bring the tools of innovation to this so this will realize the vision that you on the committee and on the congress choose. Thank you. Mr. Larson. Thank you mr. Chairman for holdings hearing. I think all of the witnesses and chairman archer for his service. I like to say from the on onset, i never tire of listening to a story by pat of his immigrant parents. On this committee there so many stories to be told that make up the fabric of this nation and what we are all about. I would like to say and echoing the comments that we do need to have more hearings. Frankly we need more stories like his so we can actually get to the gut of what we need to do in terms of tax reform. And why we may have our disagreements and procedures and that will allow me the opportunity to quote my irish grandfather who would say, you know, trust everyone but cut the cards because often times you may need to reshuffle and in some cases as mr. Roosevelt said, a new deal. Oftentimes it is the vagaries of society that leave government in a position where we have to do things. I was specifically aligned with a lot of your comments because i think we need to provide greater opportunities for people to say. In doing so i support a number of the issues and he talked about pastors think the way we have to look at it is, where can we assist in how people safe . We have a prime example. I ran an Insurance Agency. I know what its like to meet up payroll. I was trained at a school where we learned about investment and where we are said theres three legs on the stool. One of those legs was Social Security. At the same time were talking about enhancing benefits and the opportunities to save, shouldnt we be talking about something that hasnt been touched since mr. Archer has been chairman. In terms of enhancing the opportunity for people to benefit from the system that has never missed a payment. But, when this last time there was an increase in the Social Security program. It was indexed back in 1983. It has not been able to keep pace. Its an Insurance Program have any of your premiums and insurance gone up since 1983 . Yes, of course i have. Everybody would acknowledge that. Because we saw what could happen as my grandfather was alluding to, all of a sudden 2008 your for a 1k became out 101k. Without having the counterbalance which is why we need more hearings, the counterbalance of knowing there is a safety net which you also have to contribute to and say for and participate in, in the event of taking risk that your government stands behind you that was the lesson of the Great Depression and i believe the lesser of 2008 as well. What other plans which you recommend in which you agree with that assessment about making sure the third leg of the stool is balanced as well as the other . Thank you congressman larson. Absolutely both are important, Social Security as well as saving for yourself whether in an employersponsored plan working america is looking for ways, whether its incentives, or education on how to say. We have to make it simple. Ive worked in my 20 years with thousands of working americans. Theyre struggling with figuring out their finances and how to put away some extra money. Both programs are important. You have to have the threelegged stool. As far as other programs a big focus should be on coverage and making it simple for employers to offer these plans. Absolutely, think its a combination of greater access and making it easier to save and improving the incentives for people for those target populations were not saving but could do some more. I want to thank mr. Johnson, the chairman of the Social Security committee has agreed to have hearings on this so we can put the plans out there. I think that will enhance both opportunities governmentally and from the private sector. We need both. Mr. Cabela. Thank you very much mr. Chairman. I think the panel that i want to thank chairman archer for his participation in for his service to our country. I want to associate myself with some of my colleagues who have emphasized the importance of a tax reform has for americas working families. Theres a great deal of frustration the country. We see it in our politics, we sit on social media, on an hourly basis. I really think tax reform is a solution, an instrument that can help address some of the economic insecurity that so Many Americans feel. We do have to put ourselves in the position of the family that may be as to her three kids and has to pick them up from school, take them to practice and then once a year go through this difficult exercise of complying with the federal government and the irs. So i want to focus briefly on the complexity of the tax code. The Tax Foundation estimates in 2016 americans spent over 2. 6 billion hours compiling tax returns, the cost of almost 100 billion. That is time and money which could have been used for productive Economic Activity or for time spent with family. As we take on this path of comprehensive tax reform i want to ask you, the complexity of the tax system, a lot of americans have to turn to professional tax repairs to file the return. Fraud is listed as the irises dirty dozen and tax scams. Ive been supportive of the Volunteering Program where those who make less than 54000 year can file their return with the help of a volunteer. Can you talk about how increasing the standard deduction will reduce the dependence is so Many Americans have on professional tax preparers . Professional tax repai prepas have a variety function. The National Taxpayer advocate about a decade ago at a conference on tax reform talked about exactly as you say, the one time per year when the average family takes staf stockf their financial situation which is the moment of Tax Compliance. She characterized it at the time as a National Ritual that she felt was some benefit from because the people do not take a hard look at their own finances then, most families would never look at them at all, all year. So, the question really becomes the simplification of the experience that it is less painful, burdensome, and costly. The industry has worked hard to create options. Most acts come in a lot of form subway from a professional tax practitioners there is a growing sense not only from the industry but the taxpayers we serve that they need common sense simplification so that they can make Financial Decisions about what to do in the coming year for their family, rather than come away confused. And struggling. I would mention, there is actually couple of programs, the two largest that are supported and sponsored by the government are the vita centers all across this country somewhere in the area of about two and half million of returns prepared for free there every year. There is also the irs Free File Program which is Service Donation by a large number of Different Companies through the irs website under regulation. That also creates about two and a half million returns. Between the two programs somewhere between five and 6 million returns are generated for free, and one instance and volunteer Service Centers within communities and neighborhoods and in the other, online. You can access to your phone or computer. Between the two, you have significant lowcost for middle or lowincome people. It is a unique american ca invention. So many other countries the government does the whole thing as a revenue raising without the bald men of citizens. So just to simplify the understanding of the tax and enabling them to make better Financial Decisions of the future and then take advantage of both Tax Professionals and Tax Technology and innovations make it simpler and easier for folks. As i said, if you decide to have a postcard style tax return that this industry will deliver that robustly so that it will be something people have confidence in and in all likelihood having that electronic would also had security protections and easy access for people to use. Thank you very much i want to thank the panel. Thank you for your time and your inside. I know it benefited from comments that each of you had any bring in expertise and a wealth of experience to the subcommittee. We appreciate it. Let me make some closing observations and comments. First, process. Miss sanchez said history is [inaudible] the side of going it alone. I agree with that. Im not trying to pile on, but the aca was an example of how not to do things. I think will be better off if we create a bipartisan approach to this. Theres probably no argument there. Another process point is attempt to ration to evaluate tax reform discussions in a very finite time. I think the committee should give credit to the hearings that took place in similar themes that have come up. Theres been nearly 50 hearings on hearings. Well see an increasing amount of activity the closer we get to the final product. I think theres also been some discussion about kansas, this came up last week and this week as well. There is a lesson for us on kansas. Thats this. Dont allow a special provision to essentially a trapdoor for passthroughs. Theres a passthrough exemption that was allowed on it didnt happen on the corporate side, so what happened . You have a system that gets gained in ultimate activity doesnt result in come out of that. What we are proposing is not to do that. Were proposing to lower the rights at the same levels. I come from the state of what not to do. State of illinois has an underlying fiscal mess, a complete disaster. Rather than dealing with the underlying things driving, my state legislature over the governors objection said lets raise taxes. And the fact is people are leaving illinois. And people are leaving and going to other states. Because theyve done a better job. So thats a cautionary tale for us on what not to do. The vita centers that were mentioned provide real insight. I visited a couple of them in my constituency i most recently at a middle school in chicago illinois. Going in and talking to the volunteers to gain real insight on this issue of complexity. So, if youre in a situation where year visiting the site, youre sitting down and i was asking the volunteers what their average Interview Time is and these are modestly situated people and they said about 90 minutes. Imagine that. Going to the hassle of 90 minutes talking to volunteer back and forth to come up with something and all this level of complexity that nobody up here is defending and nobody at the witness panelist offending and thats what this very constituency is burdened with. I think theres also an interesting observation i like to make, if this yielded 70 cents a day, thousand bottom line and really the number, i wouldnt defend it. I dont think thats where the action is. The Tax Foundation came up with study and i would ask unanimous consent to put this into the record. Their study shows that theres an increase in 1 million, 687,000 jobs fulltime equivalents and an estimated gain of weight for, 4917 aftertax income from median household throughout the u. S. In my home state, 5256, and msn more than that, 5536. So that will be part of the record. Theres an interesting thing also and im not asking you to comment, but an observation, few years ago i had a meeting with one of the president s of one of the Large Business organizations. I think i remember the one it was but i dont want to say to because then if im wrong but, he came in and said something which is interesting and it made an impact on me. He said were against the estate tax the death tax and said really, thats not what i wouldve expected you to be talking about he said heres why. For the First Time Ever hispanic families are making serious money in this country, not all of them by any stretch of the imagination but why is it one hispanic families are making any theres estate tax. Where was it a hundred years ago when other families are making money. Its a very provocative question particularly coming from someone who has a business organization. In order for us to get to this bipartisan approach we have to settle out and an underlying tension that surfaces occasionally. The question is, to review the economy is a zerosum gain . To review that pie is expanding where people benefit to review it as if someone benefits that comes at someone elses 6p . I personally reject the notion that its a zerosum game. Mr. T barry was talking about the tax burden thats out there, when i can settle that today. But you really have to wrestle with it because if all this is is a matter of redistribution and if everybody saying this, we want alone we want to make sure there is growth in the right way. I think we need to explore more about what youre talking about, creditors not encouraging auto enrollment. Theyll be very interesting. To get back to mr. Rodriguezs key points, this notion of these getting passed out at such a low level with low headroom and very little capacity for them to save, that something we can vastly improve. Look, when push comes to shove, this postcard is so attractive and enticing. I go back to this and many other discussions, think about the premium we put on simplicity and other elements of our lives. We want to go through tsa precheck, we want to go through the easy pass lanes on the tollways. We want to go through the 15 items or less line at the grocery store. We want an expedited process. My expectation of the airlines happen so forth, we expected all aspects of our life but the one thing that has an impact on everything in the economy is cumbersome to the point of absurdity. But we have settled here today is nobody likes where we are, everybody wants to move somewhere else and we have to throw it out among us how it is that we do that. On behalf of our committee a thank you for your willingness to spend time this afternoon and i think my colleagues, particularly these two brothers for sticking it out to the end. The committee is adjourned. [inaudible] [inaudible] [inaudible conversation] [inaudible conversation] [inaudible conversation] look now at the primetime schedule on the cspan network. Starting at about 80 strength tonight, former president s bill clinton and george w. Bush discuss the importance of leadership and how to build better community. On cspan two book tv with visits from fresno, Portland Oregon and others. Then its American History to be in a look at the 325th anniversary of the salem witch trial. While congress is a way for the resource and members are in their States Holding town Hall Meetings with constituents. On tuesday night over 2000 people turned out for a town hall in detroit. Vermont senators Bernie Sanders of this photo from a reporter in north dakota, congressman kevin kramer held a radio town hall this week he talked about tax reform, crop insurance, and the affordable character. In california, Jimmy Panetta lifestream nearly two hours of his town hall on youtube. In connecticut, chris murphy held a staff chat town hall were constituents submitted questions to the social media application. To think government regulations are too complex and bureaucratic if so how would you overhaul it . Government regulations are usually place for good reason to protecting the environment and consumers. They close be a administered more efficiently. You can look at more common sense, but a lot of folks want the regulations gone so they can make bigger profit. Normally theyre there for good reason. Congresses back on september 5 with the schedule of issues to consider including passing a federal spending bill before the september 30 deadline. Also approving a comprehensive tax reform