Voting booth is the way republicans are talking about it. They are talking about the failure of the leadership and a list of examples. They are not railing on ukraine, but saying there is a narrative they are trying to build about them being a failure and they can use this as a check mark. Can i offer a slightly contrarian view . One of the surprising things about the ukraine and russia situation is the extend to which they have not headed for the exits. Putin very cleverly created a golden opportunity for them to do that. The nato meeting was happening and he creates a ceasefire. The terms of which he dictates himself. He claims she not involved in the conflict. Nevertheless he said heres a ceasefire that works this way and this way. Just as everyone is gathering. They dont do what i expected him to do is say a ceasefire. Lets back off. They went the next step. Maybe its not enough and as much as it should have been, but we have very little economic skin in the game. But they did. I think by standards of european behavior and similar crisis over the last 20 years, thats good. I agree. The other interesting thing is how it affects the debate coming from colorado and the state with gas. The export of oil and natural gas. We have all sorts of issues with can we export this and what europe decides to do with the energy equation. How much they want to stay dependent on russia now that it sees how they use it. Thats going to play in. Its an issue and senator udahls reelection and his opponent has a bill and they introduce their own independence and it was interesting to watch and try to they were not outdueling each other, but trying to outdual on energy. You see the energy and you literally see the fracking and the see the mining going on as you drive down the road. Its everywhere. To take it full circle, rachel talked about jerry mandarin. The one place where that is not an issue is the senate. It might show up. Even in the energy in colorado is in the 7, 8, 9 contested senate races down to the wire. We will see them raise the spector of National Security and or Civil Liberties in the last couple of weeks before the election. Before we throw it open to questions, we have the small matter of iran. What happens then . Up to and including the lame duck is anybodys guess. Lets say we have a deal. There will be a push by the administration most likely to reduce the sanctions we have on them over the Nuclear Program and other nepharious activities. That will be pushed into next year. You might see an immediate lame duck push. The president promised no deal. We are going sanction them. Thats what he said. What the president wants next year in the event that there is a deal gets harder. Nobody wants to be seen as the people who used up. Thats not a popular position. It is much less popular with republicans. Some of the things i am saying have passed along and shared with me, but i think the iran issue next to isis and the issue of the Defense Budget are the very top things we are dealing with with the 114th congress one way or the other. Im struck by the decided lack of optimism. Through the administration and elsewhere that a deal was going to happen. I dont know of anybody who puts the chances at better 5050. Most people put it below. The real question is what then . I think you have to move further down the sanctions because everybody said thats the alternative. You have to do it. There is this isis problem and you would like them to help on that, but its complicated. You have seen a sunni shia conflict that makes it harder. You have a really interesting 2016 president ial issue on your hands. Thats the thing. Its not going to be a couple of small topics. It will be something that they have to deal with reluctantly. They will have to pass something for isis and deal with the forum. There will be Appropriations Bills at the least where they fund all the enterprises. It seems to me that especially on the republican side, there will be a Real Old School gold water republican kind of candidate and perhaps with more libertarian roots. Where you can see National Security becoming a wedge issue. Its always a problem in the president ial elections. The history of affecting midterm elections is small. Right after 9 11, everyone was thinking about the issue. More or less you havent seen it become a dominating issue. You have seen it in president ial races. We will see it more in 20 caen as well. To bring it full circle, the debate should unfold. On the national level. In general election. Yeah. I think the American Public deserves a debate and it will be interesting between the libertarians and the republicans. You will see a similar split on the left as well. I think we will get real interesting discussion. It would be a pity if it boils down to character alone and i worry that might happen. Are you tough enough or not. That strength is not what we need. We need spider man more than the incredible hulk. A smarter and lighter and nor flexible strength than ra ra and beat your chest. I think the character tends to boil down. When it becomes political attack point. When you are articulating, it gets dangerous. For does and its not new and character will be part of this president ial election round like it has been in the last free. I graffy with steve that this spring and up to the summer recess will be a robust period of debate regarding National Security. The rendition before it comes out is im glad you said when. You will have a military commissions case which will kickoff this spring. There is an appetite for revisiting with respect to the Defense Budget. They raised the caps of the vca and they havent lifted it. If they want to make the case for a larger than some people thought would happen. Is probably this effect and we will have cocktails up there and i hope you will join us. On homeland security, they produced a briefing which is being gifted to everyone here tonight. They are on the aisles. Dont be shy. As you focused on the mideast, you take a few you talk about the pivot towards asia and my concern is it will be based in some way on coalition, building partners. Two of those partners make our Congress Look like a budget and guys are going to play golf and have a couple of beers afterwards. At least my observation, things are getting more dicy all the time. I was just in japan about a year ago. Almost begging some of the folks i was talking to to make nice with south korea and saying you are bother our allies and boy you right. There is not a lot of love between the two countries and the rational realist way of thinking about things is not cutting a lot of water there. We didnt touch on asia and its the biggest part of the world for most people and quite volatile right now. I would be surprised if i get through my time without a war in asia. We need to get the allies working and i dont see it happening without a lot of massaging. Thank you for introducing that. Lets talk about asia with this Term Initiative that is underground. It seems to be incomplete. I used to be an english teacher at the High School Level before i went to law school and my favorite line is look at what people do and not what they say. If you said there was a pivot to the Obama Administration, you would say when did that happen . You have the chinese navy expanding. You have chinese making extraordinary territorial claims in terms of the eez. Their ability. Their economy is slowing down, but i think the Obama Administration may not have been a pivot, but it has been repositioning the pieces on the chess board. We need to do that. Whats on the front page of the paper is isis, russia and i think this gentlemens question is further support for the argument that we will probably see a big debate about the Defense Budget this spring and whether you need to lift the vca or whether you need to refund and recapitalize from this decade of war. Obamas National Adviser susan rice is giving a speech i believe on Southeast Asia in particular. The government tends to react right then and dont play longterm. This is a ways of we need to be prepared. Other than china doing a lot of tack hacking, that doesnt seem to be making a lot of news right now. It doesnt mean there is not ground work being made. That was saying we need to reestablish a jungle combat training. We used to have a dedicated base in panama. We dont have it anymore. The thinking is we will be at war with an asian nation. Lets be prepared. What happened to the pivot. It was an attempt to have an Obama Doctrine and a new way of thinking to chinas influence throughout the third world. What happened . I think the term was probably unfortunate. Everybody involved in the policy will agree on that. It implied that we are not going to do this because we are not going to do that. There is some of this happening, but it means slowly shifting resources to a part of the world that becomes more important while others become less important. To some extent, the pivot is still happening. One of the premises though is as a nation. People can shift their thinking and arguing. What happened there is what we have been talking about. There is a man coming up behind you. Thank you. In last wednesdays new york times, they talked about an existential struggle going on within the state and that explained the events we have seen. He said that was an attempt to define their future. I welcome the comments on that and your thoughts on the general column itself. I spent more time than is healthy reading the literature. Its fascinating and sophisticated. Im not sure debate is the right word. There is a conversation within the people who are part of the movement. Why they are different from al qaeda in particular. There is a notion that they have embraced as a group. Al qaeda was skbrong they thought you would wear down the opponents of islam and have the safety blown past that. You do the right thing and you stop the people who disagree with you. I think as the Islamic State movement grows, there bound to have different thoughts on tactical terms. Are we going too fast or too far . Have we stuck our heads out of the fox hole. We will get whacked. I cant imagine there is not a debate to go back to the start. Was that a good move on their part . Its hard to know. There is an interesting window if you look at what they say themselves. This is not a new phenomenon. He traces not only the birth of the predecessors, but the two general schools of islamists. Those who adhere to a formerly violent jihad. Isis is the most recent and radical version of that. The other says no. We forswear that. You go this route and you get more mosques. You set up currency. Exchange program. You send students into various universities. We do it through other lawful means. And the two are at each others throats. Friedmans piece is whats going on within a fraction of this side of the debate. You can broughten this bigger. When the movement got going, what were they doing to the mideast and why were they not catching up and why were they behind the west and how do they deal with that humiliation and lack of agency that he was feeling and that he came up with all sorts of reasons. It was a quite healthy move in my view towards taking agency and saying okay, you have your violent folks over here and al qae qaeda. They tried to regain the ball and move forward. They failed. We are going to do this through peaceful and democratic means. One of the pities that that movement didnt succeed and we and others perhaps didnt do quite enough, but it was an internal issue in terms of how much they could succeed on their own. One of the real pities is now we are back in a world of hard core islam and less hard core islam rather than another way forward for how you deal with that sense of humiliation. I think i saw another. I have a question that came in from twitter and its a great one. Thats on the panel. It was the Veterans Issues that play into the midterms. Thats another they tried to play up on the republican side. The competence question. Veterans are popular for obvious reasons. They should be. You havent seen a whole lot of pressure from the republican side on that other than another example of how this administration is bad at leading. Its a hard issue i would say. North carolina has come up a little bit in the race. But first of all if you look at the votes, the democrats voted a lot of money for veterans and so on and the republicans have not backed the votes. You have a va scandal and it points in a lot of directions. They said someone is not good. Thats a scandal and its a hard thing to argue. I doubt it will make a huge vent. You have veterans running. Im not sure it will be an issue. Im not sure it will be out of the va scandal. The power of being a veteran. Thank you to the person on twitter who sent that in. I used to cover business so i would say the market has priced that in. I think we have time for one more question. I will take these two questions. There is another area that is west africa and whether ebola will be such a detablizing influence and concerns out of the collapse of states. Im curious what people thought about the National Securities coming from that. The vote on the issue of health care and biodefense defenses and an adcriticized and backfired. Thats one issue. It goes back to the point about the budget. There is not going to be a strong push for the policy, but there will be a need for money. Especially in the u. S. Destabilizes the regimes. Where is the money going to come from . I think it will be part of that conversation, but im not sure they will take it over. Some might say obama is sending more to fight ebola than to iraq. Thats silly. For the simple fact that if this disease is not addressed by civil society, and it spreads, it has a factor for destabilizing not only part of africa, but the world. Military numbers ki8ed tens of millions and that hopefully wont happen today. They are well within taking the on this. I think last winter, this was going to be treated as a medical need. They dont trust the government for good reasons. Getting serious about how we hope the governments are important because this is what it gets you. People dont let their sick be taken and they metastasize. The difference between isil and ebola is less than you might otherwise think. The final question to the gentlemen there. John donnelly. I would like to go back to iran real quick and if the negotiations fail and you talked about the sanctions, i would think this is wearing out. What are the oughts that israel or the United States launches an attack. Thats a heavy question. Thanks. There is a constant agitations for war and more on the republican side, but not entirely. This is pretty big. His knowledge up front. Maybe he can mitigate and what he has been doing all along is the fear of war by talking about how difficult it will be. They are punishing worse than what it has done. We can go pretty hard and think you will see more agitations. We have been talking about the program for decades and how worried we are and how we might need to attack. Whether it goes to the next level is hart to imagine for me. I raised one of the stories that the finalists had been chosen for president obama. You are well into the second term when the president came with two wars, where he is steadfastly a posed to and dedicating to ending. Its probably clear to him that its not going to be totally out of afghanistan and iraq when he leaves office, but he doesnt want to have a third war. He doesnt want the number to go up. I think tim is right. If anyone can do to avoid new conflict while trying to do whatever they can to declare victory in one conflict. If that means pulling conflict and saying we are done, hold your breath if nothing else happens. They box themselves in because they vowed and promised that iran will not get a Nuclear Weapon. To get themselves more room to negotiate, they have been very harsh in their description of we will not let i i ran have a Nuclear Weapon which implies the threat of force. We also promised to close guantanamo. Government doesnt also keep promises. You are right. Punishing sanctions. I think that first of all, you are right. There is no appetite through this administration. The question of how much pressure is exerted from outside forces from congress and israel and others depends on how the negotiations conclude unsuccessfully. There ways that could happen. They could end with a bang or whim peror we got close. If not for the crazy ayatollah who is the supreme leader, we should have gotten there. We will wait to see if he dies off sometime soon. The amount of pressure to do something militarily will depend on what that looks like. There a lot of understanding and the pentagon calls it the mow the lawn strategy. You mow the lawn and the grass grows again. You recognize that a Bombing Campaign and the boots on the ground solution for iran is unthinkab unthinkable. A Bombing Campaign only gets you so far. Why start that six years into his administration. I agree with everybody and would add that we would do everything to encourage them not to do that. They are a sovereign state. I agree with everybody and i dont think its any. You are involved with what sanctions are. They go up and over to the side and keep going this way. We will keep there is no appetite with the war against iran. With the politics when it comes to israel is a different matter all together. On that peaceful note i would like to congratulate security on their first anniversary. I would like to invite you to join us for cocktails in a few minutes. Thank you for coming tonight. My name is david ellis and i would like to join you in thanking my guests. Thank you. One of the campaigns we are following is the pennsylvania governors race. Incumbent governor corbett is facing a tough challenge from tom wolf. They faced one another in hershey, pa monday. Heres a short portion of that debate. So the governor barn stormed calling pensions of crisis. Do you believe that pensions are a crisis and they havent done able to come to terms on a pension plan. Do you think its a crisis or is it not. If you do why and if not, why not . It will be a crisis and we need to make sure we do what the governor did which was fund our pension system. We have not done that over 10 plus years. Governors past and present have not done that. We make exception to that. If we keep up with the pattern, we will have a huge crisis. The balance goes up every year we do not fully pay off the debt. We have not paid off the debt over the past 10 plus years and the balance has been going up. We have to stop doing that and its not talking about the plan design. We have a new plan we can work with pay the bill that we havent played adequately. That doesnt burden the taxpayers. We will have a solution to the problem. Im not going to kick that can down the road. A onemonday rebuttal to that . Im surprised. We are talking the same thing and disagreeing on how to do it. Im looking at the cost because of authorities we have in pennsylvania. We have revenues, but i have yet to see the economy that is growing by taxes. Where and how much he wants to spend and how is he going to get the revenue. 9. 9 is too high. We agree. I think we could be tracking a lot more business coming to pennsylvania if we could lower that. Just like we eliminated the inheritance tax. Thats the start. You have to control your spending first. 3e7b pen governor corbett debating his challenger tom wolf in hershey, pa. You can watch the entire debate on our website, cspan ont organization. Nebraskas second congressional debate between tery and state senator and the iowa debate between congressman democrat and republican joanie ernst. Campaign 2014. More than 100 debates for the control of congress. Next, a conversation on ways to improve the tax coat. Economic adviser to joe wighten later office director. This is mind minutes hosted by the center for american progress. Welcome, everybody. Thank you for joining us for discussion of improving the tax code, a subject that is in the news today. Im the director of the Economic Policy team here at the center for American American progress. We think there is a widespread agreement that the tax code needs improvement. We also think there is a fair amount of improvement on how to do that. We put together a report entitled improving our tax code. Our report highlights principals of good policy on which there is subspashl consensus with broadening of tax base and minimizing distortions. This report follows with more than 20 individual tax measures on which we have identified some or in some cases substantial agreement. They cover individual, business, tax provisions and the earned income tax credit. At the end of the report, we have an appendix that lists these provisions and the impacts over the 10year horizon. These total over a trillion dollars. A nontrivial sum and a measure of an already existing agreement. Of course there major differences about how to proceed. On matters such as the correct level from marginal rates and whether to move to a Corporate Tax regime and other issues. The location of Common Ground is not so obvious. However we think that the current tax code can be made significantly better without waiting to improve or resolve every issue. To help us think about this, we are fortunate to have three distinguished guests who will discuss where they believe we can find consensus is on this important matter. Our first panelist is the president of the American Action forum and he has had a distinguished career in academia, government, and in policy work. To note a few of his achievements, he served as chief economist of president george w. Bushs council of economic advisers in 2001, 2002. He was the director of budget in 2003. He was a chief Economic Policy adviser to senator john mccain during the senators run in 2008 for the presidency. We thank you for joining us today. We look forward to your comments. Next i would like to kk jared who is eastern fellow. He served at the department of labor and director of the White House Task force on the middle class. The adviser to Vice President joe biten. Thanks for sharing your thoughts with us. That brings me to the moderator on the policy center. Erics impressive experience includes high level positions at the treasury and the Internal Revenue service and the Budget Office and his expertise spans the tax code. We are grateful for the willingness to guide the conversation today. I will turn things over to the panel and let this discussion get under way. Thank you for the introduction. Im very pleased to be here. To discuss the important topic of tax reform. I was thinking on the way over that republicans and democrats dont agree on anything, even on things they agree upon. However with this group we are talking about high level politicians that themselves are distinguished economists and very thoughtful people. If they are on both sides of the fence who can find area of agreement. Along with the philosophical disagreements, these are the two fellows who can contribute to that. Im going to start with a leading question here. We all know that the tax system is highly flawed. There is less on what should be done to fix it. I would like to ask each of the panelists, i will start with jared if he could define what he thinks is the major problem of the tax code and reform and i will ask doug the same question. I will go for like five minutes. Most likely. Let me start by saying thanks for the invitation. Its great to be here with doug and eric. I enjoyed this peace very much. I thought it was useful of the loopholes and how they work and the costs in foregone revenues. However just to begin to get to erics question, i guess having said that, i have a number of concerns which frame my view of what tax reform should look like. First of all i have to talk about the reality of tax reform. Its my view that perhaps the title, the growing consensus to improve the tax code is too optimistic. Im not sure. Like i said, they never agree on anything. Im not sure it exists although i wish it did and i think it should. I hope doug is right in the disagreement with me. Ask yourself the following questions. Let me put it this way. Its true among mark and the folks on this stage in general, that there is growing consensus to reform and clean up our messy and inefficient code. Its false among the beneficiaries of that code of the Current System and i think you have to ask yourself this question. Are these beneficiaries who invest serious money in the status quo getting more or less powerful. Do you think they are getting more, this is an optimistic framing of the question. As an answer to erics question, i actually think that a lot of what david camp put forth is there a lot of good ideas in that plan and as it shows a lot of good ideas that area awfully close neighbors to ideas in the president s budget. Probably one of the most penitentiary from my perspective in terms of really cutting through a lot of garbage in the code is this idea of capping deductions for tax expenditures which is 25 and a 28 cap in the president s plan. That has been there for year, by the way and gotten absolutely no love from anyone on the hill as far as i can tell. So those are 3 Percentage Points is nothing this this game in terms of actually negotiating a solution. Camps top rate is 35 . The administration is closer to 40. Certainly within spitting distance. My first point that i i do believe there is a growing consensus among people who think intelligence is about the vested interests that seem to be more powerful than less. The only other thing i will say in my opening comments and here i take a slight bit of issue with the cap report. Let me quote from the report. Even if antitax ideology blocks reasonable steps to raise revenue, the report if you looked at it puts forth a plan that would raise 1. 4 trillion and i think thats admirable given future budget constraints. Even if such steps are blocked, congress can improve the tax code and some of the the consensus could be paired with a bipartisan expansion and legislation and i bold this part, no net effect on revenue and satisfy Grover Norquist player protection pledge. I disagree. I think even if we can close loopholes, tax reform that leaves rates lower without first locking in higher revenues will fail to meet the need for higher revenues and budget sustainability down the road. Now, i think there is a strong case to be made that in order to achieve sustainability and meet the challenges, we will be more ready. I agree with paul who writes that longterm budget projection that is a boring type of science fiction. I get that. I think if you look at any realistic base line, you may convince yourself and think correctly that the near term is sustainable, but many years outside the 10year window. I think eric and his group have written about this. This is a considerable sustainability problem. The suggestion that somehow revenue neutrality is an acceptable goal is that i strongly reject. Particularly on the personal income side. I hope you give us im the author of lots of those. Thanks for the chance to be here today. I think this is an important contribution. Tax reform is something that is difficult to get done. Its a little over 100 years old and in that time we had a handful or less of genuinely major tax reforms that means as a going in proposition, this is tough to get done. When you think about it, i think agreement is less important than compromise. I dont think we will get agreement that everyone will say thats the one. Instead in the usual process, we will have to hammer out a compromise where people will walk away disappointed and not get everything they want. Thats life. That process needs to happen. Its important that it get done. I think the major impediment to this so far is less on the vested interest. Its hard because someone is getting cored. The public doesnt have a lot of app tide for this. We did polling right after, like april 16th on tax reform last year. And at the time when people just filed their taxes and supposed to be ginned up r, and the publ has a deep suspicion and the focus groups we learned two words you cannot use. The words are tax and reform. Because they think tax reform is i trick and they dont think they will walk away with everyone paying their fair share. They think it will be some sort of trick of one sort or another. This is a very tough environment. Its always hard. There is not a lot of support back home for it. If you look at provision by provision, you will find out we will not get agreement and we will have to get compromise. Nevertheless im optimistic that we can do better. I hope that we can get a better design code and certainly there is a list of flaws that we can walk through depending on the system. The sooner we get started on getting this done, the happier i will be. Well, let me try to turn this a little bit to the substance of what you guys think is desirable and then we will move back to the politics that we are all attempted to jump into. If we had in 1986, the idea was you would trade off lower rates for Broader Tax Base and keep revenue and distribution the same. There is not a revenue for distribution. I take your point about the polling results and there was not much for reform on the part of the public. There is a big wh think should, should be left alone because theyre desirable . People talk about things like the research credit. Are there things that should be gone after that arent on their list . So the reports actually a great lesson in the difficulty of this whole arena. Let me talk about a couple of different of the tax expenditures. Think about the nontaxational insurance. Very difficult to find a policy person that wants it matter . Theres not a agreement among republicans on how to pair it back. Do you want to have a standard deduction . Do you want to have a tax credit for instead of the nontaxation . I think that 100 needs to be reformed. How theres not even an agreement on one side. At all. There are some many people dont think of as tax expenditures. Nbn i for example dont endorse the move forwards normal depreciation schedules. I come from a perspective that wants to turn the tax system as a whole into a progressive consumption tax where people are taxed on what they take out of the economy. And to do that, basically you want to turn everything into a large ira, deduct any saving investment up front, tax everything that comes out at the end, and that structure is inconsistent with the depreciation approach to capital cost recovery. I also think that if you look at the other kinds of investments you make, you get to expense [x investments in human capitol has a business. You really get to expense and get a credit for rnd because its basically the people and their ideas, and then you have this nonexpense of physical capitol investments. I think equal liezing the tax c equalizing the tax, i wouldnt endorse that entirely. And theres going to be a lot o÷ debate about that. That came up in the camp proposal. He also did that, a lot of debate about that. Theres one i think is flat wrong. And the bank tax. Thats just a new tax. That has nothing to do with tax expenditures. And its5ur tax on a particula sector of the economy and a particular size of entity in that sector, and thats not consistent with tax reform that doesnt pick winners and losers, where you treat Economic Activity as equal as possible. Then the last one, which, which is just, you know, regardless of where you are on this, its a hard tax policy problem is carried interest. All right. If youre a consumption tax person, the taxing of the carried interest is exactly right. Remember, you want to deduct up front, but tax everything that comes out. You should just tax that at ordinary rates, but t j n no deduction up front. So its not right to just tax the end, you have to get the front end right. If youre an income tax person, you should tax the awarded to the manager, thats compensation, youre giving them something and should be taxed that the point at ordinary rates, then at the end when its increased, thats what you get taxed. The proposal that is the most common, lets just tax this, is actually inconsistent with any principle tax reform. And its a hard problem. You learn a lot going through this. One of the things you learn is these are hard tax problems in and of themselves, and when you combine hard tax problems with politics, it gets tough. So i think, theres a lot of whats unsaid, particularly these would be the hard tax problem problem. That of course i agree with. And thats one reason why this idea of capping deductions is very appealing to me. That is you cap the deductions, 28 , camp says 25 , and you cut through a lot of gnarly expenditures you want to get rid of. Im very attracted to that idea. I know in the president s budget, i believe, the numbers are in this report, i believe it raises 500 billion over 10, thats serious savings. Some other pieces of the report that, while everythings hard like doug said. These are some that i just find really, really important. Both by dent of their kind of egregiousness in violating the 1 just gave a paper that he sent around last night. Im still absorbing it. In there is a figure which shows the marginal tax rate on investment, on corporate investment, and the marginal tax rate on debt finance investment according to these slides and jason is very careful in data work. Negative 60 , the marginal tax rate on equity investment, equity finance investment, 37 . Plus 37 is the marginal tax rate on equity finance investment, and on debt finance, its negative 60 . Now if i told you that, and then i asked you, do you think an economy with that kind of a tax code might get into problems with accessive leverage . I suspect youd nod so hard youd hurt your neck. That strikes me as an obvious bias, and reducing the deduction, the magnitude of the interest deductions strikes me as important. I think theres a longer and more interesting conversation about how to deal with the deferral of overseas taxation, derek has made important contributions there, and i hope the moderator will weigh incol well. I must say i think the administrations minimum tax on foreignings is a smart way to thread that need al bit. I agree with the spirit of the report that talking about broadening the income base, particularly on both income and personal tax side by not favoring one type of income over another. And here doug and i might argue about those ideas. But i do think that particularly the favoring of nonlaboring, i think the carried interest is a good example of that problem. And i also, my final concern here is i believe, report gets li actualliless than thek]5c÷ li president s white actually less than the president s white paper tax reform, i think this kind of neutrality principle is violated with incentives for businesses, not just small businesses, larger businesses to become pass throughs. And i think thats a distortion in the code. If you look at the share of tax receipts that go through ccorpse now, they pay theayu÷ corporate versus the personal side. Used to be 90 of personal receipts, maybe 20 or 30 years ago, now i think its 60 . I think those incentives also violate a sound economic neutrality principle. Okay. Well before we move on to corporate business taxation, i want to have one more question about individual tax expenditures. You guys have both said relatively little about the biggest ones except doug mentioning health insurance. Health. Mortgage, health, state, and local, charitable. Have at them. So i guess, the question, the question is, and i guess jared mentioned an overall limitation which would apply to those things. I guess the question is, do you think those taxscr6 expenditure should be limited as part of reforming . Thats really nis if you want to get individual rates down. And is it better to do it on a case by case basis, or some kind of broad basis as jared has suggested . Ill let doug peel it back first. First of all, yes, i believe all should be paired back. No question about it. Many of them are poorly designed for the nontax policy objectives they have. Im indifferent, and its a matter of literally legislative politics, which strategy. Limit them as a whole, draw a line, or gore everybodys equally which is always a lesson in tax reform. Whichever gets over the finish line whats your instinct as to which would be more politicly viable . I think not having to own picking up the tax expenditures would be easier for members. But you know, in my theory of how this gets done, youve got to have outside political cover from the public wanting to get it done, you have to have real political capitol spent by the white house. You have to have support by a lot of outside groups to get it done. And so, its not as if, if were going to get to a position where we get tax reform done, its not like theyre really going to have to own every little thing anyway. I think its more of a question of current climate where people are terrified that we get this carve outs. My personal experience, and its actually its not as deep as probably either of you guys, i mean ive worked with politicians, but ive worked with politicians enough to find that claim doesnt quite resinate to tell you the truth. That last claim about how they cannot own this stuff. The minute you Start Talking to them about the mortgage interest deduction, many of them just clamp up and cant, have a hard time hearing you. Which is why i do like them, or a broad across the board approach of capping deductions. Ly say that i am comfortable with reports recommendations on all of the expenditures you mentioned. Although if im being totally honest, i would say that state and local is something id like to think more about, i could certainly, if we were going to go in that direction, id want it to be very gradual because, there is a case where theres considerable differences among states. So i want to try to balance that more gingerly. So is this an area where it sounds like both of you are kind of saying similar things except maybe a little different emphasis on strategy. Is that probably i think thats probably true. Yeah. Before we leave that, i think its important, you know, when you goat actually doing Something Like this, its important to recognize the facts on the ground. One of the things that has happened over the decade since 80 as we have systematicall taken tax payers off the rolls. I personally blame the reagan guys for this because they inflation, which was a great policy idea, but it used to be the case that every couple of years, inflation would push people into wmqx higher tax bre they would go do it, and this took that away. And the only way to give people a tax break was to take them off the rolls. And in the process, we have transformed the individual higher income americans. Let me agree with you. Okay. Having done that, we have to be more cognizant of the economic lives of high income americans and te1xdesign a tax that can actually be enforced and i think the biggest problem now is the differential treatment of Investment Income in the income tax, the alternative income tax, and the new aca tax on high income americans. There are three different tax systems floating around there. They have three different definitions of income, thatwiac needs to go away. Thats just a disaster. Well it sound like, it is, slightly discomforting to have so much agreement here, but well fix that shortly. It does strike me that doug is agreeing with a point that i made earlier about the importance of broadening the base by not favoring a particular type of income. And here ill perhaps surprise some of my fellow progressives by saying, i definitely agree with this problem that doug surfaced about folks coming off the rolls, but the way i think of it is that while lots of progressives talk about the need to achieve a more sustainable budget path and the away i did in my introduction, its framed as thats why we have to tax the top half of the 1 on all of that. Now i think in the near term, i completely understand that because thats where all the growth has gone, but i dont think we can achieve budget stainability, in fact im sure we cant on the basis of just the top 1 . Its just, its, it may satisfy a certain amount of pitch forkery, im sympathetic, its important to push back against the deep inqualities, and wealth and equalities that have grown in the tax system. But just looking at the massive global income, and the need for ive stressed. Which isnt just to reduce budget deficits, also to meet demographic challenges and climate challenges and public good challenges and safety net, poverty, i dont think thats, thats just not achievable on the top 1 alone. All right. Let me just follow up on this 47 issue a little bit since my organizations probably responsible for that being out and by the way, the numbers 43 now and its projectsed because the child credits a fixed dollar amount and so over time, its rising income more people paying taxes. Another kind ofw en angle. A lot of the reason this number is so high is weve decided to do welfare, maybe thats a not a good word, the earned income tax credit, the Child Tax Credit rather than through direct outlays. I want to ask both of you to respond, how does refundable credits affect the way we perceive the tax system and should this really be part of the tax reform discussion,÷x or should we sort of kind of put this off to the side in some fashion. And kind of in our minds treat these as spending when we look doing. I think these matter tremendously for perceptions of the tax code and for reforms. Because there will always, in discussion, there is a distributional question. Whether its an Income Distribution, across state distribution, distribution matters to people. And its information thats got to be in the discussion. So the difficulty is, i at least believe that our current budgetary treatment is just wrong. And i would love to see it changed. The way these, now were going 100 into geek world and i apologize. The way theseiif÷ things work, especially 100 in Tax Liability and you have a in tax refundable credit worth 150, the first 100 is a reduction in taxes, then the last 50 shows up as spending outlays. I believe it should all be outlays. I think the way the books should look is, that person pays 100 in taxes and the government spends 150, sends them a check. The reason i believe that is we make a commitment at the beginning of a fiscal year to provide that credit regardless of what they earn. So we dont know theyre going to get 100 in taxes paid, i think we should just say, were committed this 150, and budget it that way. It would change the way we think about distributionally neutral tax form because there are low income people paying taxes, and i think it would change the debates somewhat, nothing changes that dramatically. Sew i think this is really important. We know like the eitc has been very successful. So, you know, its not an issue of sort of the policy, its how it spills over into getting tax reform done. Well, first of all, let me just say, i completely appreciate and except the contribution to the debate that your team has made with the 47 and the 43, but its very, very important to always point out and reiterate and underscore that its not the case that 47 or 43 dont pay taxes. Thats just income taxes. Personal income taxes. Its very, very important to say that because you actually have to look awfully hard to find someone who doesnt pay taxes, whether its the payroll tax, which workers pay. All of them including the selfemployed or state and local, etc. So if you actually, and weve done this at the center on budget, weve looked at the share who really escaped taxation and its tiny and its groups that are students and low income disabled. Just to be very clear about that. Um, i think that when it comes to the refundables, particularly the earned income credit, the Child Tax Credit and here im not just talking about the original idea, but the extension under the recovery tax. Here i think were talking about, tax policies that are spending through the code. I agree, i think the implicat n implication, its a questions in dougs comments there. Allan greenspan, i think hes right. I think these are very important forms of spending. And very good ones. In fact, you would be hard pressed to find pretty arge conservatives who had anything negative to say about a very robust earned income tax. Which is extremely important wage subsidy loan come workers, it can boost an income, a low income working mom with a couple of kids, 4500, 5,000 a year. And in fact, and its in this report, i think theres a very smart proposal with some bipartisan support to extend that. Particularly the part that goes to childless adults. Its a smart, prowork policy helping to offset the damaging trends to earnings and Employment Opportunities document bottom. Okay. I want to move the topic to business taxation. I know you wanted to talk about that. And i guess, the president has proposed a businessonly tax reform. And thats been discussed, its not fully flushed out, but that seems to be the direction he wants to go. And of course camp has the business and individual combined. Theres been some talk that might be easier to get Business Tax Reform and leave the individual tax reform out. I wanted to ask jared to start. Is it feasible or sensible to do and doug to comment after Business Tax Reform alone, and is there any concern about having the corporate rate lowered and the individual rate remaining the same and what happens when those things are different . How do you deal with that . Its a good question. Look, these days, whenever i say anything about feasibility, a lot of peoples eyes rolls. So if we talked about whats feasible right now. Wed have a very short conversation, and i, i for one changes, but was kind of surprised to see that done. Its not, i wrote a piece about it, its not running in the washington post, the post everything section so you can see where im coming from. I think its an important environmental change. 9. ÷ way we should do tax policy, just to be clear ju about that. I do think you could do them separately, and wliel its not ideal while its not ideal because of the specific differentials youve said. One of the themes of my comments is the mun you start having differences within the code and this type of income is preferred, youve created lots of interesting work for tax lawyers to define all your income at the lower rate. So i do, i do think the differentials are problematic, but i dont think were getting rid of them any time soon. I dont know that weve hardly ever gotten rid of them in the contemporary tax code. We have to accept that and ask about the realm of the possible. It seems to me that both sides, both sides really, pretty energized around reforming the corporate side of the code, the business tax code, and i say that in this kind of growing consensus discussion with the caveats that i began with, which is, you know, its easy for wants to come up with it. Its harder when you Start Talking about taking goodies away from people who prize them. You know, my tax expenditure is your job creation program. But i do think that if you look at the details of camp and obama, i think on some international issues, theres some space between them, but, in a climate of compromise and a climate that its widely recognized that the statutory rate is off the reservation, international terms. I should think that that would be something we could do before the personal side. Let me start with the diatribe. What the treasury did is nothing short of appalling, and at best, pointless. It is, i think an inappropriate use of their powers to take shots at deals that are actually in play right now. Lays out the rules, and then firms can plan appropriately, make their mergers and acquisitions and go on. Hp i have zero interest in a treasury that acts this way. And i think it is, its a bad precedent. Maybe unprecedented for them to do what they did last night. Im not a fan. Its also not going to do anything. Lets be very, very clear. All of this centers around the fact that the u. S. Corporation income taxes out of step with competitive realities in the world. And it doesnt matter who initiates a transaction, what matters is when its being discussed and one in the u. S. And look at it, itll always be better for the headquarters to be outside of the u. S. Because nearly everyone else has gone to a system that taxes the income only once in the place where it is earned and does not put a secondrho layer of tax in the u. Doug, its not really, its raising the distortions on the earnings. Yeah, yeah. Its out of step. And so, everyone else is gone, basically toward a more territorial system for a reason. Its a competitive reality, and were out of step with it. And were still going to lose the headquarters. And instead of the u. S. Firm initiating the transaction, the headquarters are going do go. This isnt going to change anything on inversions. Its just not going to change the fundamental problem, and it goes the wrong way from the reform. The ultimate reform lowers the tax on it and simply goes towards territorial system, this is all about making them pay more tax. Its done poorly, it goes the wrong direction for the point of real reform, and it doesnt solve a real economic problem. And other than that, im a fan. And i think this is a seriously important area of tax policy right now. But what about the Business Tax Reform only, which was the question . Its a corporation of the pastors. So, if were going to do that, we have to recognize that people pay taxes, businesses do not, and you want a system thats neutral across all form. We were only taxing in the individuals return. Theres business income, its on the individuals return. Its having the appropriate applied to the business earnings. See if you can get corp reform. Thats a hard thing to do. And so historically never has been done super well. The eedsiest way to do it i think is to go back to the original idea of expenses all the investment, dont allow the interest deductions. Than gives you a neutral treatment and the interest dividends at the vinl level. Thats how you get there. Politically, will it fly . I think its going to be very hard. I do. Neutral or howbuc÷ would you par that . Imless worried about revenue im less worried about revenue neutrality on the corporate side. If were getting down to a competitive one, say, 25 , its going to be a hard time making a revenue neutral. Thats all there to it. So that suggests a businessonly reform might not be fly. You need Something Else with it. Runs right into the problem youre cutting americas largest corporations, and having you know not for americas Small Farmers and workers and you know the politics of that are just toxic. Ill let jared comment. So here we have some disagreements, my friend doug en i argue with a lot and have Great Respect for. First of all, i think the inversion critique is an odd one. I hate it, its terrible, its going, its just a terrible precedent, its really awful, its going to do all these distortions, then its not going to do anything. Seeming consistent to me, i dont think its going to do as much as id like it to do, an a much as say 11 or some of the ones that proposed legislation which is the right way to do tax policy. At optimal way to do tax policy. But in the absence of a functional political system, a congress that can get around those obstructionists and work together. I think the administration has a very important responsibility to try to protect the tax base, and be negligent them not to if theres something you can do about it. Which by the way brings me to another disagreement in a territoriality is the only way to go. I would point out to listeners of this discussion arexev very Important Initiative thats being undertaken by country called beps. Most do have a territorial system, although its one that they are continuingly trying to adjust the base erosion. These countries are trying to system they are avoid the pricing problems that the cap report articulates. So i would be quite weary of moving towards a system like that while it looks to me like other countries are recognizing it as a key source of base erosi erosion. Finally, its, if you lnl to the discussion of all the problems with our Corporate Tax code and they are, and those problems are real and theyre deep and its its way too complex, you probably dont need to know anything more than the fact that ge, at least when i grew up, made toasters and jet engines has a thousand tax lawyers on staff. Its critical, i think to recognize that american corporations have never been more profitable. That in 2013, last full year of data, corporate profitability is a share of National Income was the highest on record going back to 1929. Not only have they recovered from their losses and they sustain large losses in the downturn, but theyve surpassed their prior peaks. That doesnt mean that our tax code doesnt need to be fixing. I myself emphasized many important fixes to the corporate side of the code. But the idea that our corporations are somehow being deeply thwarted is completely belied by the data, as well as by the way the deepx yw erosionn the base. That inversions, and ill let it go. If you look at what the treasury proposed, they are proposing that they have the pown to recharacterize transactions that were taken before a emergencier and acquisition internationally, some after. And in some cases with arbitrary numerical guidelines that are founded on nothing that i can identify. And some cases judgmentally by the treasury staff. I dont think that represents good tax policy. And it will create a lot of uncertainty in companies who have found economically beneficial Merger Acquisition partners internationally. And i think thats a bad precedent procedurally, and is bad tax policy. Well. Okay. I mean, let me just agree with one thing. Heres what i dont like about it. Because again, its second best administration would be not to take these actions in my view. Doug used the word precedent. Next administration comes in. May be an administration of the other party. Ive been in these administrations, in one, at the beginning and one of the first things you do on day one, two, three, you reverseati at execue orders you dont like from the last guy or gal in the place. Now if you start doing that with the tax code, terrible. So i take, i take your point t but i dont th the administration can viably sit on its hands and allow this juggernaut to occur without doing something. I suppose we could spend the whole time talking about inversions i think weve made our points. I think youve made your points andly not weigh in. So if we and i will not weigh in. So if we nothing, go on. You probably dont want me to. Go ahead, exactly. So in any event, we were going to talk about politics, we been talking about that kind of interspersed, but lets say, i have one more question. Should we be thinking about new or Something Else or are though or just so off the map these days we cant even talk about them . Yeah, want me to go feirst . Yeah, you can go first. Again, i think its so far off the map we shouldnt talk about is not the way to talk about this. You were, we talked earlier about the 86 reform, that had a four year corrective role. And weve had this, weve had, ive written about this if folks were interested in following up. Weve had this significant increase in dark pools fueled by high speed trading, High Frequency trading, it creates contributes to volatility and a lack of transparency and Financial Markets creating some of the volatility thats taken these markets off the rails, time and again over the last few decades. I think a small financial transaction tax would be a good idea as scored i understand, i think a three basis Point Financial transaction tax would raise over 300 billion over ten years. Thats real money. And i like that idea. The only thing, just an asterisk, i hope we can talk a little bit about in this space about extenders. I know its gnarly and in the weed, i think thats actually where weree4a9eoing to see newx policy discussion pretty soon. Okay. So, i didnt say anything about no new tax basis, but, i dont think anybody should even consider vat, its a political nonstarter. You dont need a vat. He said a vat. I thought he said he liked the vat . Theres a very nice thing on a black board called a vat tax, and my preferred consumptions tax, progressive consumption tax is a progressive vat. If you say that, its over. So i didnt say that. Understood. Second is, i believe that when you sort of lay down the principles of tax policy, you should tax real Economic Activity. The con sunls of goods andv6v÷ services, the consumption of goods and services, the preferred income or consumption tax, but youre taxing real Economic Activity for the purpose of raising revenue and not tax Financial Transactions as much as you can because it is transactions particularly differential taxation of returns to capital, dividends, capital interest gains that transforms the cancer savers of tomorrow into tax lawyers and accountants. Thats a terrible incentive, its a big problem with the Current System. I wouldnt do the financial transaction path, youre going down the right path. That leaves the carbon tax. You know, its a, its a consumption tax, consumption or carbon, i have no reason to impose it. Theres an enormous literature that says if you want to do something on carbon. That thenqybu most economically efficient thing to do is to use a carbon tax on capitol and labor. Im all for that. So if that gets in there to lower the payroll tax and the Corporation Income tax, thats what the literature says you can do. It makes a lot of sense. Solves a political problem in a very clear way which is there is no way youll ever get a carbon policy to pass on a stand alone vote in u. S. Congress in the foreseeable future. In the same way to get the Corporation Income tax down to 5 to 10 , my kind of numbers, but if you drive the carbon policy because they need the noun get the rate at five or 10 . If you drag them to the low corporate rate, you have created the sort of classic coalition of the grudging that walks away, deal gets done. Thats the only scenario i can see where one of these things happens. Other than the 5 or 10 you threw in there, theres a lot to like in your rap. I mean, let me ask you about a tiny Little Corner of that just to see where you come at it. We both like the carbon tax. Good. Thats three of us. Heres a wrinkle on that that is kind of interesting because this was, this came up a few weeks ago. I mean a carbon tax i would argue is pretty far from the table. Right. So there was a discussion to increase the federal gas tax, 18. 4 cents a gallon since 1992 or 93 or something. And interestingly, there was a bit of a democratrepublican coalition, or at least a couple of members from the opposite side of the aisle who proposed an North Carolina in the federal increase in the federal gas tax which is dedicated to fund our Highway Infrastructure which i actuallx think, i believe its something erics written about. I think such dedicated taxes are smart and good policy. Nice connection between what youre doing there at the gas tank and what youre driving on when you go on the highways, and i thought this was a very good, smart idea. Now, i will say to my chagrin, the white house was not very iahp hc politicians run away from such things because whats the one thing everybody sees every day . Its their gas price. I thought that that was a nice Little Corner of the carbon tax debate that had some promise, i wonder if doug agrees. This is actually a big issue. Because we, weve sort of wandered into a key moment of choice on the future of highway finance. The tradition has been, lets finance it with the user fees, and the user fees the gas tax and have a user pays model for the finances. Thats not whats been going on . Were using general revenue transfers into the Highway Trust Fund socync its become part of general financing of the government. And rather than have it happen by accident, i think the Congress Need to choose. Onex model is, have a user fee, get a user fee that can fund the necessary investments in a sustainable way, or, put it in the general corporations process and say were going to make our highways compete with all the other nondefense Discretionary Spending needs and fund it out of general revenue. But there needs to be a choice. Whats going on right now is not good policy. If youre going to go down the userfee route. There are things that are better than the gas tax. Very, veryxn1j÷ clear advantage vehicle miles traveled. They can be differentiated by axle weights and actually really more closely mirror the harm inflicted on the highways so youre paying for what you damage. Those are places to go, but i think just raising the gas tax doesnt, doesnt solve the fundamental question, how are we going to finance this . And doesnt get the right user fee. If i were bill clinton, dont let the best be the enemy of the good. Here we have, i just gave you an example of a republican and a democrat who in this climate came together and suggested what i think is a smart tax increase, and youre saying thats not optimal because its better vehicles miles travelled which is better, but i agree. Come on, lets join the realm, that wasnt the realm of the possible, but it was discouraging to me that i was a very lonely voice out there trying to boost that debate. I dont know where you guys were. We werent really too involved. Theres been some proposal to raise the gas tax and offset it with various income tax which strikes me as getting into the realm of why have a trust fund if youre doing that. I agree with that. My point was not to argue against compromise, i started by talking about how important it is. But lets know what were trying to accomplish at the outset. I agree with that. I agree with that. I dont think theyream oz thinking about it. Thats a fair point. Okay. So i would like, we only have about 20 minutes left, id like to open it up to the audience for questions. Let me ask you about extenders. Okay. You can talk about it. I wrote tax notes, i get a bonus point every time i ask about extenders. Thats twice. Lets just fire up the recorder here, or else this is a pointless exercise. So great discussion, really interesting. Could you identify, who are you . I write for tax notes. My question is, this is kind of a very big picture question, but i hope it doesnt turn into vague, it would be nice, i really want to know what you guys think in terms of the realm of possible like we were talking about. If tax reform is so difficult anyway, why not just swing for the fences and just try to remake the system in a fundamental way instead of doing something incremental . Because its going to be hard no matter what. This is kind of hypothetical, but what do you think . I dont think it is hypothetical. You know, so, how does tax reform get done . My view of the universe. Number one, lots of Public Education as i said. People need to be cognizant of whats wrong with the Current System and buy into the fact that you want too;h change it thats going to effect all of them. You have to do that. Number two, an essential piece is white house leadership. The white house has to take the lead because only the white house is positioned to make sure the other party, you know, says this is necessary to be in. They say look, only the white house can disappoint their own party. And say to them, look, i know this is tough vote for you, well take care of you. Campaign for you, raise some money. Sponsor your total migration bill, whatevers important to you. You know, only the white house can make that go. And so white house leaderships essential. Third piece, 86, what did they do . The treasury, eric, wrote a transformative plan. Kykyk kx to an x as you could probably get. It swung for the q÷fences. It swung hard enough for the white house itself was made a little uncomfortable, but the white house modified it and sent it up to congress. Thats an important step. Up something congressmen cant go home and say look, i dont want to do this, but the president asked, you need that. You need to give them cover. You need to ask them to do hard things. You need to give them cover, plus they get to fix 9xuqit. Its all flawed. Each committee gets to take credit for fixing it. I think swinging for the fences is an important thing. Its not what comes out at the end probably, but theres a place for it. Maybe im too much of a creature of this former thing, and i apologize if i, if my vision of swinging for the fences is more of a bunt. But i actually thought that dave camp kind of swung for, if not the fences, you know, hit something that looks like a double. Now i was critical oft2n the pl for as much as i praise some of the courage because the way it was structured, it actually started out revenue neutral, and then lost its revenue neutrality after the first decade. That looked extremely clear to me and both myself and my colleague around the budget did the analytics that support that claim. Im not saying it was perfect, but, you know, he kind of did what the cap folks did in this piece which is like lets go through the code and take out all the crap that everybody agrees is distortionary. I very much would support a camps idea was dead the afternoon of the day he presented it, and not because of the opposing party, but because of his own party. So while i appreciate your suggestion, and i think that we should start a dialogue as ive suggested, it takes a long runway nap swings for the fences. I think that its not really helpful to just have that discussion without having the political discussion that says how do we get from here or there, so the ideas can have a reasonable audience which they dont now, even within their own parties. Well, just add one comment, i am not as responsible for 84 treasury work as doug says, i left during the process. But that was probably the most political lly naive exercise th was done. The only thing he said was dont trust the mortgage interest deduction. Everything else was left free, and retrospect this exercise really started, started the process. So maybe a little bit of political naive might help. Yeah. Very principle policy proposal. You need that. Right. Yes. Please identify yourself. Im frank, george mason university. I would like to get to the personal income tax because that seems to be the critical barrier. And it appears that just as the Corporate Taxes and extreme tax in terms of other countries may be the same thing. But what i havent seen done is an analysis of where the income of the highest tax brackets goes. The administration seems to talk in moral terms, its not fair, people should pay their fair share of taxes, but if you look at the high income of high earners, it has been established that a lot of it goes to expenses, imported, and of course a major portion to investments, much of which may be trading income rather than wealth Building Investment in plant and labor and so on. So im wondering if we dont need an in depth Accurate Survey of where the money goes as you go up the tax bracket. Well, thats a really interesting question. And i would first of all refer you, well, you may know about the surveyed Consumer Finances, aspires to be the survey youre describing, so the Federal Reserve every, is it two or three years . I think its every three years, its every three years fields the survey of Consumer Finances which is intended to actually give you a very granular look at the uses of particularly income at the top of the scale. I commend that to you. Where your question leads me in terms of that conversation is a broader macroeconomic observation that im talking about and writing a lot about on my blog, which is it does seem like we are a world, a wash in savings, and deferred earnings in the context of our conversation, a wash in savings, wash in loanable funds in terms. And yet a wash in weak demand. And figuring out, and some of dougs comments about smoothing the road between investments, Investment Income and investment possibilities i thought were resonant. So figuring out how to connect those two disparrot facts of life right now, a lot of, a lot of loanable funds, investment levels that looked kind of low to me. A lot of investment needs, whether its public or private, but certainly in the public space, in terms of our public infrastructure, and you know, very weak labor demand. Thats a marriage that should happen and to the extent of the tax code that should facilitate, thats a great inspiration for tax reform, particularly on the corporate side, but on the personal side as well. Jareds just wrong. And part of its just strategy. You should not design a tax reform for the problems of the moment. You should design a tax reform to give you a tax code thats durable and has the perm nancy and raises the revenue over the longterm. And i thought your comments war wh lesson in tax policy because they echo of my views, number one, you want a tax people based on what they consume. Right. Is it imports, whatever, i dont know the facts to that question, but tax them on their consumption, dont try to tax Financial Transactions, that gets you into tax trouble. Its too easy to move. Its incredibly expensive to administer such a decision. C. Kc its getting harder in a global ieed world and focus on real things. Things that actually improve the productive capacity of the economy. Those should be Building Blocks and the principle sense. I mean, i, that seems extremely or thogal to the comment that im just wrong. I think a lot of what you just said is in a way. A lot of what you just said is what i was trying to say in disagree is, where our investment needs productivity and enhancing investment needs is great. We may differ on this. I think theres some real elasticities to tap in terms of infrastructure. And im not the only one that things that. Larry summers is articulate. Thats not tax reform. Thats a spending policy. Tax reform is hard enough. I disagree. Tax reform is hard enough. If you turn it into macroeconomic stablization, longterm investment on the public sector, welfare policy, you made it too hard. My point, youre missing my point, my point is that there are trillions of dollars locked up overseas, for example, very much as a function of the tax code. They should be unleashed through tax reform. By the way, just to be very concrete about this and you may not like the president s plan, but as a transition to the international taxation, including this minimum tax i mentioned. Theres 150 billion of one time savings, thats plowed right into infrastructure investments, very concretely, theres a plan on the table to do just that. You may not love it, but it does link tax reform to these ideas. I wanted to make one comment. I thought this was a very, very interesting question. Usually when we look at taxation of high income people, we think about distribution and we think about incentives, how does work to save, invest, so forth. This is a question of what happens if high income people what are they actually doing with the money . I think we probably dont look at that kind of question very closely, and as the Income Distribution gets unequal, are people giving nor charity, are they spending it on yachts . Its an3u ep interesting questir examining how progressive we want the tax system to be. Leaving aside my view is taxing high income people. We ought to know their economic lives in designing that tax. Its very important. Let me get to more questions here. In the back there you might be. Okay. All right. Im joe kennedy, i consult with Information Technology and innovation foundation. And actually i have two quick questions, one is, how much of the burden of the Corporate Tax is born by labor . And the second what percent . I think that everybody sort of agrees that if you get Corporate Tax reform and also individual reform, it will have a big positive effect on the economy, and yet in traditional score keeping, we dont count any of that. And so, my second question is, how much of that should we count . The camp proposal got a score from the joint tax that had significant positive effects, dynamic effects and should we say that none of that counts or some portion of it counts or what . Those are great questions. Before i turn it over to the panelist, i would just say on the first question about who pays the Corporate Income tax, theres probably not an agreement on this panel. We say labor bears 20 , capitol bears generally 20 , and corporate equity, 60 . The reasons for that are described in a paper on our website and how we came to that conclusion. So you can go to the Tax Policy Center webds, theres a paper by jim nuns on this. My colleagues might have totally different views. Ill just see you and raise you in terms of links. I recent ligated this question in a investigated this question in a blog on my site. I linked as many different analyses as i could find, the average is 2025 range in terms of labors bearing the burden, but there are other measures as well. Yeah. I think that its clear theres no consensus on this. Im at the other end. I think a majority is born by labor, you know, we see, we see these Companies Lose national competition. We lose the best jobs, the oneso with the highest Fringe Benefits and thats the labor loss. Theres no doubt about it. The cdo puts it at 73. Well, they actually dont. There was a model that did that, but they actually say 25 for labor. Thereby displaying the uncertainty about this. I think its a real concern. Well, on dynamic scores, id like to have both of you comment on that. First of all, and doug can and eric should correct me if misat a ti misstate this, but its important to disearn what cbo does and the think the fact that cbo was incorporate behavioral elasticities, but doesnt allow for dynamic supply side effects in economic terms such that you could count on getting a bunch of revenue back from growthdt7 effects from your tax reform. Its the right way to go in my view. And im quite strongly take that position. Theres, its not true that, so just to clarify, its not true scoring because there are behavioral effects registered in the scores. What they dont do is allow for the feed back effects that end up making predictions about gdp growth because of the tax changes. Theres nothing wrong with other folks running around and doing that, and i know jct did that with camp, and paul ryan, very much enjoys that exercise. And i expect to see a lot more of that from him. But when i see the magnitude of the dynamic effects there, it looks very much to me like extremely exaggerated impacts in order to make the numbers work. You cant get down to 25 , be revenue neutral and make just astounding saumss in my view about the dynamic effects of your package. And thats a very dangerous way to go if youre concerned about fiscal rectitude down the road. Doug, you had experience with this as cbo director. Correct the record, i was the Budget Office, and it was there that i supervised the very first analysis of the proposals. And the characterization is right, cbo in conventional scoring hold the size of the economy fixed. And the whole idea of putting in growth effects is the line that becomes dynamic scoring. I am a proponent of this because i believe we should indicate to policy makers everything that is different about the world before and after the policy their contemplating and acting. And you have to give them before and after, and if it includes more Economic Growth or less Economic Growth more or less tax revenue. That is value to believe them and utterly important to be in there. There is no i it the in. How you put it in is important. This is called scoring, and scoring is different than forecasting, its different than conventional academic modelling, its scoring, and when when you into the budget world, you have entered a cult. And it says, we are going to treat every proposal the same. And so, you know, scoring is arbitrary at some level. But you do it the same for everybody. Here is the best analogy. Football games you get six points per touchdown. I dont know why. The ex interetra point. Two if you run it or throw it. I dont know why. But the fact that those arbitrary scores are the same for both teams are across all teams wide, that is the same, you always do the score the same. You do it exactly the same way and you will get more information into the process thats good and you will treat all proposals fairly, and thats essential. I think we have time for one more question. Let me call on you. Yeah. My name is mary ann or mary, and im an independent observer now my question is, it doesnt mention here the gross historic proportions income in equality right now. What do you think about a negative income tax, a refundable negative income tax . Especially for the young that are unemployed or underemployed, parttime employees. I was actually at the debate of the mayoral candidates and there was one gentleman saying, well i only earned 5,000 this year. Now the minimum, what is it, standard deduction and exemption is about 10,000 for 2013. Why wouldnt that young man not be able to claim the government that refund. The other question i have, and thats thats been this idea has been around i think for a long time. At least a hundred years. The other the gdp is about, what, 17 trillion . The budget is about 14 trillion. Now, what is the proportion of personal income taxes that go into [ inaudible ] and Corporate Taxes. And so, you know, at 14 trillion for the budget and 17 that is producing you can [ inaudible ] how much, you know, where does the get the the other question was minus 60 on finance okay. Ill talk about that. You want go first . Yeah. Addressing the first question, i think we can we can refer you to places can you get yeah. Owe think you might be thinking of the debt gdp. The debt, actually, debt held by the public somewhere around 10 trillion. So anyway, but at any rate, negative income tax. And eric can help you get all of the numbers you seek. I think that that, for center on budget where we work, we think a lot about poverty policy, antipoverty policy. One thing i observed, you cant miss it, if you hang around this town and think about poverty policy, is that the thrust for the last 30 years, really, has been towards work for ablebodied working age households. Work is a path out of poverty. And in that spirit, seems like the earned income tax credit, refundable Child Tax Credit, the, what i called earlier, the refundables, i would admin mum wage, but we would argue about that, in the tax code. Those kinds of jnqpxrefundables certainly function like a negative income tax, but they arent for everybody. They are conditions work and im okay with that. On that note of agreement, we should quit. Okay. I think we have, we are done by one clock we have one minute. Did you want a very quick one . [ inaudible ] im a cpa, we have a small cpa firm, and i think i have an understanding of what individuals go through. Just one quick comment. I think tax reform might be a good idea, but people were resistant because youre going to have a major reform. Then next year, Something Else. Its just like, you know, i dont care if i pay 4 a gallon for gas, but i dont want it to be 6 one week and 2. 50 the other week. The other thing i want to say is i think everybody should be open to taxation. Not just consumption. I dont see why a person like mitt romney can get a billion dollars of net worth and not pay tax because it is kept as a hedge fund. I see nothing wrong everybody hates taxes. But we have to keep up with revenue. Why not a net worth tax. You could set the limit, 50 million, 1 off 50 million. I will cut you off because the net worth any quick sponsor taxes have been unpopular, property tax one of the most unpopular in the United States. Im not sure rm urj a route to getting tax reform. But i understand your point. I do want to say just one word about the tax code changing all the time. The durability of the reform is very important. One of the sad things about the 86 reform is that it unwound relatively quickly. There are many diagnoses. But the key part is you cant do n independent of wh jarod talked about in terms after long term budget. Unless you fix the spending side to match the revenue side, youre inevitableablyffn havi these deficits. We had deficits in late 80s, early 90s, which opens you up to tax code. The integrity of the reform gets unwound. And so, the key to durability of tax reform is willingness to get the spending side in order as well. I think you make a very good point. And i like your idea about a net worth or wealth tax. I will note that, and i think the way you tee it up is exactly right. On its face, consumption tax of course is regressive in the sense that those with lower incomes consume much more of their incomes than the wealthy does mention progressive consumption and that can be done. So i take your point and i like your point. But i will just lead where i started, which is why do we have such a, in my view, such a tiny and ineffective estate tax. Why dont we have an inheritance tax. Net worth. The answer is because the folks who are defending the status quo have more income than ever. We have this toxic combination of wealth, concentration at the top of the scale and money and politics play a great are role than ever before. So while i like the way youre thinking about this, i think it bumps right into the very deep political constraint that i started out the conversation with. Okay. If money was this important, mitt romney would have been the nominee in 2008. On that note, disagreement on this and agreement on the previous question, i think the two panelists for showing their areas of agreement and in a very high level discussion. President obama will be back at United Nations for a second day. In the morning, he will deliver remarks along with other World Leaders to the u. N. General assembly. In the afternoon, the president chairs a u. N. Security Council Meeting during the president s time at the u. N. He is expected toi2j ÷ talk aboe u. S. Led coalition that conducted air strikes in syria. Against Islamic Militant groups. At 3 00 p. M. Eastern also on cspan. A nig reminder, you can join th conversation on facebook and twitter. With live coverage of the u. N. Health on cspan 2 and cspan 3 we show you the most current public affairs. Then on weekend cspan 3 is home to American History tv, the programs that tell our nations story. The civil wars 150th anniversary visiting battle fields and key events. 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So this is a panel, why and how should we cover the asianamerican community. So those are good questions. The question is not, should we cover the asianamerican community, because that answer is yes. But my name i