Transcripts For CSPAN3 Ways And Means Committee Begins Work On Tax Code Overhaul 20170519

The committee will come to order. Good morning and thank you all for joining us. And today our committees focus on the top priority for the American People. Progrowth tax reform that will create jobs, increase paychecks and strengthen our nations economy. America now has one of the most costly unfair and uncompetitive tax systems in the world. The need for progrowth tax reform is urgent. Todays high tax rates on americas businesses drive good paying jobs overseas. Makes it more difficult for our job creators and workers to succeed here at home. Americas burdensome International Tax discourages investment in our local communities. Scores of loopholes give favored treatment to Washington Special interests while millions of hardworking americans havent seen a real pay raise in years. Heres the good news. President trump is leading the charge for bold tax reform that will unleash the growth of jobs and paychecks nationwide. And hes calling on the house anthe senate to put forward or best ideas. Our committee is ready to answer that call. Over the past several years weve held roughly 40 subcommittee hearings on all aspects of tax reform. All of our members, no matter what side of the dice you sit on, know that tax reform is an economic imperative. Now is the time to go bold. Now is the time to live deliver real results for the American People. We welcome all Serious Solutions that will help achieve that goal. While theres no perfect way to tax, there are Proven Solutions to grow our economy and improve the lives of all americans, especially the middle class. Currently we have the highest Corporate Tax rate in the developed world at 35 . For Small Businesses the rates can be as high as 44. 6 . To increase middle class paychecks, we know these rates have to come down. Washington must take less from americas job creators so they can invest more in their businesses, workers and futures. We also know that bold policies such as bold and immediate expenses are progrowth for jobs, paychecks and our economy as a whole. According to estimates from the nonpartisan Tax Foundation, this provision alone, allowing businesses of awe size to immediately write off their Business Investment, buildings, equipment, software and technology, will grow americas economy by more than 5 over the next decade, create 1 million fulltime jobs and raise wages and paychecks significantly. Finally, the numbers show us the businesses of all sizes are eager for tax reform. Theyre ready for the opportunity to innovate, to grow and hire new workers. Recently the business roun table surveyed a group of more than 120 ceos about tax reform. 82 of them said that tax reform will prompt companies to increase Business Investment and three out of four said they will increase hiring. These responses made clear that tax reform will create jobs, create paychecks and grow or economy. But make no mistake, there are also consequences if we fail to act. 90 of the ceos said delaying tax reform will farm the u. S. Economy. Causing slower growth, hiring and slower Capital Investment. And more than that, delay would force all americans to continue to live with the tax code that works against them, not for them. Take it from roger enaand natal guess, own and operate a ro to rooter franchise, roger and his wife said as a Small Business owner im scared to death each year and how im going to have to pay into the government. Its like trying to operate your business with one hand tied behind your back. Sometimes you feel like both hands are tied behind your back. All Small Businesses know that feeling. Well hear from real live Business Leaders about what is needed to get jobs, paychecks and the economy moving again. Our witnesses are top level executives from American Companies of all size from 80 worker to 80,000 middle class workers. Their expertise will help us understand how different proposals will impact americas job creators, workers and our families. Since releasing our house blueprint for tax reform last june, weve received thousands of comments from businesses and thought leaders. Feedback we take very seriously. We look forward to the expert guidance our witnesses will provide today. We thank you all for being here to liend us your insight. Theres no perfect way to tax but there are proven way to grow our economy. With todays hearing well take a critical step towards putting their ideas into action for the American People. With that ill now recognize Ranking Member neil for his opening statement. Thank you for holding this important hearing. We all agree the tax code is broken. Its far too a complicated. Certainly in need of repair. Our current tax system isnt working for families and businesses alike and we agree that the rescissions should create jobs for working families. However, we should reject ideology and Work Together to reform the tax system for the 2 ist century. According to a recent pugh study based on fact, not opinion, the share of households fell. Aggregate Household Income has shifted middle to the upper income house holds. The Research Found that 49 of u. S. Aggregate and income went to the upper income households in 2014, up from 29 in 1970. And for middle income houses, the share of income was 43 in 2014, down from 62 in 1970. Wealth is now concentrated at the top and i assume theres broad agreement on that issue. We can disagree on how that happened but not to miss the point, greater concentrated health at the top is the reality. Income stagnation is a real challenge and one that needs to be addressed in tax reform. This is in part while working families sent a central signal to Congress Last november. They havent received a pay raise in years. Their bills are piling up and theyre concerned about on certain financial security. Put simply, too many feel forgotten and left out by their government. Tax reform should be about moving the dial to help middle class families prosper. That means focusing on job creation and helping families with day to day costs, housing costs, grocery bills and child care. It means helping working family to buy their first home, send their children to college and care for their elderly parents. And of course it means helping families save for retirement and that means protecting the tax incentives in the code for retirement savings. We should make sure that when your American Families sit down around the dinner table, they can look across at their spouse or their partner and their children and know that things are going to be all right. That is not the case in too many homes across the country today and that needs to be addressed. Thats why democrats are committing to ensuring that middle class tax reform is the true winner in any tax reform proposal. The American People dont believe that massive tax cuts for millionaires and billionaires grow the economy. The American Family knows that tax reform that provides mitd l class tax relief and ask corporations and the wealthiest americans to pay their share is what will grow our economy. We will oppose any tax plan that helps the rich get richer and does nothing for those that need our held. And all of us should oppose a tax reform that results in a greater burden on the middle class. I hope the administration will move back to the test that was sent out by secretary mnuchin for tax reform, he stated, quote, there will be no absolute tax cut for the upper class. Furth furth furthermore, it must be done in a responsible manner. Word are thrown around a lot these days but make no mistake, tax cuts do not pay for themselves and anything to the contrary is ooh nonstarter. However we consider tax policy and economy wide effects, i would argue the importance of considering the Macro Economic effects of other policy changes including acknowledgment that robust investment in our neighborhood structure would have Significant Growth effects throughout our economy. We should think about using the revenue from a repatriation to pay for infrastructure and productive investment purposes. In conclusion we have a unique opportunity to sit down and Work Together on tax reform. After all we all agree that the Current System is inefficient and underproductive. I stand ready to work in good faith tax reform with our republican allies and friends in congress and also the administration and only if we do and make the effort to assist the middle class. Thank you, mr. Chairman, for calling this hearing. We look forward to hearing from our witnesses as they join us today and we look forward to a continued and productive conversation. Thank you, mr. Neil. Todays Witness Panel includes five experts. John stephens is Senior Executive Vice President and ceo of at t. Zach mottl is the chief alignment officer at atlas tool works incorporated. David farr is ceo of emerson leg, Douglas Peterson is president and ceo of s p global and steven rat ner is chairman of will advisers llc. The committees have received your written statements and theyll be made part of the formal hearing record. Weve reserved five minutes to deliver your oral remarks. Mr. Stephens, well begin welcome. Thank you for being here. Thank you for members of the committee. I appreciate the opportunity to be in front of you today. Im the chief Financial Officer of at t and i sincerely appreciate this opportunity to discuss the importance of enacting comprehensive Corporate Tax reform with you today. At t is a company with a 140year heritage of research and innovation that includes 8 nobel prizes and more than 15,000 patents and pending pat tens worldwide. We employ more than 200,000 people here in the United States and over the past five years weve invested more in the u. S. Economy than any other public company, right at 135 billion. One of the biggest issues facing this country is how to unleash Economic Growth, which has under performed for the last decade. We can and should do better. A key driver of u. S. Economic growth is private Sector Investment. When investment increases, so does Economic Activity, hiring and wages. And when more people are working and making more money, they have more money to spend. However, private Sector Investment in the u. S. Measured as a percentage of gdp is at its lowest level in generations. It is not surprising that the u. S. Economy has been marred in sluggish growth for nearly a decade. If were serious about robust growth, then we must get serious about jump starting private Sector Investment. And the best way to do that is to fix our broken last century Corporate Tax code. Achieving competitive Corporate Tax rates is likely the most effective catalyst available for public policymakers to increase Capital Investment, create jobs and increase wages. Lowering the Corporate Tax rate will also make the United States more competitive globally. You can respond to Foreign Countries that are implemented modern tax policies to aggressively compete for our jobs and our investment. We have a once in a Generation Opportunity to comprehensively update the code for the 21st century and put the u. S. Back on top. First, we need to reduce the Corporate Tax rate. This is the quickest most straightforward way to jump start investment in our country. It will bring your taxes in line with other developed countries by reducing the rate, simple economics will drive companies to invest more in america rather than elsewhere. Second, policymakers should allow for the full expensing of Capital Investments. This is an effective way to quickly stimulate the economy. The Tax Foundation estimates this policy change would create the equivalent of 1 million fulltime jobs. 100 immediate expensing removes the negative effects of taxation on investment. And we know it works. Appreciation, provision with bipartisan support from this committee allow accelerated depreciation that positive tifftiff ly affected our decision in those years. Plain and simple, we had at t invested more under bonus depreciation than we would have otherwise done. The ability to fully expense investment would do even more to incentivize at t and companies throughout the United States to accelerate investment. And more investment directly means more jobs. We recognize that any comprehensive Corporate Tax reform will involve tradeoffs. Thats clear. But the key word is comprehensive. Any plan being considered should be judged in totality, not just by a single provision. For example, one area i know the committee has looked at is eliminating interest expense deductibility. Viewed in isolation that provision would be extremely problematic for me. But i understand that it may be necessary as part of a broader solution. If the Committee Plans to eliminate interest deductibility, i would encourage you to utilize reasonable transition rules that do not penalize past choices Companies Like ours have made under a vastly different tax system. This would not only give companies appropriate time to adjust their Capital Structures to the new system, but also allow them to immediately increase their investment in response to a lower overall tax rate. Mr. Stephens, thank you for your testimony. Five minutes always goes faster than it appears on paper. Well return during the question period for you. Thank you for being here. Mr. M. Ottl, youre up next. Thank you for being a witness. Im the chief alignment officer for atlas tool works, a family owned Small Manufacturer in illinois. Im here today representing not only my own company but also the 750 manufacturers who are members of the technology and Manufacturing Association tma in illinois. These manufacturers, many in the district are proud to provide goodpaying jobs and careers to 30,000 people in the schicago area. Most are like mine, survived nafta, weathered the china tide and managed through the rescission. Through innovation, modernization and cost control we produce more product than we did 20 years ago. And were poised to take advantage of the reshoring. Were successfully competing against the best the world has to offer and were proud to help manufacture the wealth of america. However, in order to continue our success and grow while creating more goodpaying jobs for americans. We need your help. Im here today to testify in support of your work to comprehensively reform the u. S. Tax code. I believe this is the best and fastest way to grow the u. S. Economy and create more jobs in america. I would like to highlight two things, the opportunity for trade competitiveness through tax reform and the unique pain felt by Small Manufacturers due to unfair treatment under the current code. Today the most difficulty barrier is the self inflicted tax code. Much of it written decades ago. I understand that many are going to argue for reducing the current rates. And this might be helpful in the short run but i believe our economy and citizens need and deserve permanent comprehensive reform that improves americas trade competitiveness. The manufacturers i represent are so pleased that this committee placed the border adjustability. In the form of good and services taxes. These average 17 globally and act as tariff and subsidy replaces. Most have rates between 17 and 22 and every american exporter into the eu has to pay those rates to sell their product there. Mexico raised the mexican vat to 15 , they built a new tax wall for american products. India is in the process of adopting a goods and services tax. Further more, any country that wants. I believe that tax policy and trade policy go hand in hands and tax policy has far greater effect on trade than any trade agreement could. Good tax policy, one that encourages domestic imports is good trade policy. Its unilateral. We dont need to negotiate with anyone. We dont need to ask permission from an International Body and we dont need to risk sparking a trade war. Every one of our trading partners have a vat system. We need to change the tax laws and immediately american producers regain their edge and the working men and women can get a tax break. I want to get back to a world where american producers compete and win on price, quality and service. The second point i want to highlight today is the importance of simplifying the tax code and reducing the overall rate. My company is like many manufacturers businesses in america. Were family owned, own our own real estate and we dont have a significant staff of tax experts. We work hard to be competitive, create jobs and pay our fair share. Consider that Small Businesses have provided the fastest employment in the United States but we receive some of the worst tax treatment under the code. Usually smaller manufacturers are paying the highest rates because we dont develop the high plan. We offer a reduction in payroll taxes and fund the reactions through b. A. T. S. We need to avoid disadvantaging Small Businesses. These types report the taxes on the owners personal tax reform. The calculations are excessively complicated. My own Family Business which together employ 80 people have three different tax structures, one c corp, to s corp and one llc to hold the real estate. Tens of thousands of companies throughout the United States are not looking for a handout. Were hoping for a level Playing Field from our tax code and the opportunity to earn ur prosperity by again competing on price, quality and service. All were asking for from congress is a permanent tax code that drastically improves our competitive with a move toward a simplified reduced tax system that places the emphasis on a border adjustable component. This provides a level Playing Field to dramatically increase the good paying jobs and grow the economy at a rate weve not seen in decades. Thank you for the opportunity to provide this input. I look forward to your questions. Thanking you, mr. Mottl. Mr. Farr, youre recognized for five minutes. Thank you. Welcome. Thank you for the opportunity to appear before you on this critical u. S. Economic growth issue. Im chairman and ce o of emerson in st. Louis, missouri and serve as the current chairman on nen board of directors. Emerson is a 15 billion Manufacturing Company pr vieding innovative products, solutions, industrial, commercial and Residential Markets and we have over 0,000 people in operations in more than 150 countries. The nem, the larges trade association is committed to a policy agenda that helps manufacturers grow and create jobs. We appreciate the efforts of the advance progrowth and permanent tax reform. Manufacturers in the United States struggle to compete and win. On our tax system with high tax rates and outdated International Tax rules and a significant Tax Compliance burden, we have the best chance in over 30 years to advance significant tax reformg and must take full advantage of this opportunity. It will enhance u. S. Economic growth. Since the last major reform in 1986 manufacturers in the u. S. Have innovated but the tax code has not. With the combined statutory Corporate Tax rate that can top 38 , manufacturers face the highest Corporate Tax rate among the nations. This is a competitive problem. And top rates can be higher. And this hurts their investment opportunities. Over the past three years emerson paid 1. 8 billion annually in taxes worldwide. More than half of that was paid in the United States. At an average effective tax rate of approximately 32 and a marginal tax rate of over 37 . Emerson pays real tax cashes here in the United States. A key objective shared by emerson is a top fed call tax rate of 15 . We must lower the tax rate for pass through entities, Smaller Companies in the u. S. Manufacturing supply chain. Lower rates will make manufacturing more competitive, encourage greater investment in the United States and promote job creation and Stronger Economic growth. Outdated tax rules represents another major problem. Emersons business is global. More than 52 of our sales in 2016 were outside the United States. As a u. S. Company headquarters in st. Louis, missouri, emerson typically pays more in taxes on worldwide earnings than our foreign competitors. This is another competitive issue. Most kwodeveloped companies hav territory call systems a enthey pay little or no tax when they bring their earnings back home. The United States has a worldwide system meaning Global Companies where they do business, they pay taxes as well as when we bring the earnings back home. This is a significant disadvantage when the u. S. Companies are competing for global business. To improve u. S. Competitiveness, any tax reform plan should increase a territorial system similar to those with our competitors are headquarters. This will strengthen the u. S. Based suppliers and allow for the flow of capital back to the United States for investment right here in america. A tax reform plan encourages long term Capital Investment by allowing acceleration of newly invested assets. One of the most important being the full expensing the first year, expensing lowers the aftertax costs of capital, can drive increased investment and Economic Growth along with job growth. At the heart as the head of a global Manufacturing Company head quartered in st. Louis, missouri i strongly support robust r d incentive. This is critical to ensure that the United States remains a leader in Global Innovation and maintains americas advantage in technology. U. S. Manufacturing want the United States to be the best place to compete and manufacture in the world. We want to attract direct foreign investment. A permanent tax reform reducing the tax rate to 15 moves to a territorial system, maintains a strong r d incentive and faster capital costs recovery will ensure we achieve this goal and improv our countrys competitiveness and ability to grow. We operate in a fiercely Global Economy and we need a fiercely competitive tax plan and we need it now. Were committed to work with you to advance the much needed tax reform as soon as possible. Thank you for having me here today and i look ghard uard to q a. Thank you mr. Farr pmt mr. Peterson, youre recognized. Good morning. Thank you for inviting me to speak. Im grateful for the opportunity to share my perspective on how tax reform helps all Companies Better compete. Im doug petter oon sob chief executive officer of s p global. Our commitment has ban at the foreflont of u. S. Economic growth since our founding over 150 years ago. Beginning with the expansion of the nations Railroad System to the rise of the Capital Markets to the growth of digital technology, our Central Intelligence has remained independent and guided important decisions throughout u. S. History. Today i want to thank the committee for all of the work you have been doing to reform the tax code. I offer you my continued support as you move through the legislative process. My message to you is twofold. First, we need to reform the u. S. Tax system, lowering the Corporate Tax rate to level the Playing Field and putting in place a more Competitive International system. Second, we need a permanent comprehensive fix that will promote investment, innovation and growth gr in the u. S. Economy to support American Companies and workers. S p global competes on an international level. While we have grown significantly since our inception, we have kept most of our intel leg churl property in the u. S. Which means we pay a large majority of our taxes in the u. S. Since u. S. Has the highest statutory Corporate Tax rate among the countries at 35 we e have a much higher effective tax rate than our international competitors. Canada dropped its corporate rate from 36 to 26 and the United Kingdom will have a rate of 17 by 2020. In fact throughout our history weve consistently paid an effective tax rate of over 30 . While many of our competitors pay in the low teens. This high rate hurts our ability to compete against companies located in countries where Corporate Tax rates lower their overall costs. With a less Competitive International system, u. S. Companies face or uphill battle. Currently when Foreign Companies established in a country where the territorial tax system sells good into the u. S. , they pay little if any Corporate Tax here. In addition Foreign Companies may pay little to no Corporate Tax when they return profits home. In contrast, u. S. Businesses that sell goods and services to foreign customers are taxed fully in the u. S. And more than 2. 5 trillion in profits from u. S. Companies is offshore today, something that doesnt happen under other tax systems. The basis of our tax code was designed after 86, occurred before the internet in the information economy which introduced new innovative business models. The emergence of technology, advanced manufacturing, modern agriculture, the growth of property and globalization of markets are all new features of the economy. The tax code has not evolved with the economy. The result is a highly unfair system that undermines competitiveness. The tax inequities advantage foreign competitors over their american counterparts can be traced to this antiquated code. Its time for a change. For deck katsds the United States has been the birthplace of innovation and new business formation. We should use this for comprehensive permanent tax reform to ensure it continues to be the engine of growth for Small Businesses, startups and other american job kree yarcrea. Were losing ground and we should be leading. I Hope Congress will enact substantial changes for growth and jobs in the u. S. Thank you for this opportunity to provide this testimony and i look forward to having a discussion with you today. Thank you very much. Thank you, mr. Peterson. Mr. Rattner, youre recognized and welcome. I speak as someone who has spent 35 years in the private sector as an investment manager meeting with companies, analyzing Companies Investing with companies as well as having spent time in the treasury in the early part of the Obama Administration. And i would certainly conquer with what every speaker has said about the need for comprehensive tax reform after 30 years of neglect. However in my opinion any major tax legislation should meet several important tests. First it should be deficit neutral given projections. And seconds it should be fair and not diminish our system, it should improve or International Competitive position. On that basis the proposal by the administration falls short in several important respects. While the president s focus on tax reform is laudatory, his onepage plan includes far more detail on how to cut the taxes than pay for the reductions. Nonspart zahn researches estimated that the net cost could be 5 trillion to 6 trillion over the next decades. This h would drive up interest rates, the deficit and the federal debt. The deficit is rising again. These projected deficits would be exacerbated by the trump plan. The committee for responsible federal budget forecasts that the ratio of debt to gross profit under a high of 80 would rise sharply and reach 89 by 2027. The trump plan would drive this ratio to a resounding 111 . To counter these concerns the Trump Administration appears to be resurrecting the discredited supply site theory that high deficits resulting from tax cuts dont matter because the fast Economic Growth will close the gap. Thats not what happened following the reagan tax cut by 81 and by the enof his teen your two thirds of his tax reductions had been reduced. Nor it is our experience that tax cuts pushed through in 2001 and 2003. To pay for the trump plan we would need average growth of 4. 5 per year. That has not happened on a sustained basis in modern history and highly implausible in the future given our current aging and productivity. The Congressional Budget Office projects 2 growth for the next decade. Steven mnuchin believes that 3 growth is attainable from the plan. I know of no independent economist who thinks thats possible. Even if it is, it would be far short of what is needed. Given the economic trains on middle and working class americans, it is critical call that any tax reform plan be focused on helping these americans. However the details of the trump plan contradict secretary mnuchins assertions that there would be no net tax cut for the rich. The plan includes lowering the top rate on earned income and doing away with the estate tax and the alternative minimum tax. Some deductions are to be eliminated. But when the Trump Administration provides enough information for experts to score the proposal, i have no doubt that the rich will be the big winners. Gary cohn, the director of the Economic Council argued this qualifies mr. Trumps plan as a middle class tax cut. A family of two or more pays less tax under current law than it would under mr. Trumps plan. Third regarding growth and investment. While the large tax cuts could be viewed and enhancing short term growth, the size of mr. Trumps tax cuts will quickly overwhelm the positive benefits. Most importantly Rising Interest Rates will squeeze out private investment. The policy center estimated that his plan would deduce gdp 4 after two decades. It should enhance our International Competitive position. I would agree that the need for Corporate Tax reform is without question. While the stated rate for companies is 39 , many pay far less because of the use of avoidance techniques. The average Corporate Tax rate is 10 to 15 points lower than the statutory rate. That is unfair to many stakeholders. What should be done transfer pricing and lowering of the standard rate of 25 which is in line with the ocds unweighted average. I would like during the questions to talk more about the issues like the trapped cash that were referred to in the earlier comments but for the moment i close that simply ag e agreeing that a comprehensive tax bill is long overdue but it needs tore fair to the average american and reform the tax system. Thank you very much. Thank you, mr. Rattner and well begin questions. Its important that we do this right. The goals the House Republicans developed for this generations opportunities further rather than a tax code to merely wring money from you, we want a tax code built for growth, literally designed to grow jobs, grow paychecks and grow the u. S. Economy. And as were doing that, leapfrog america from nearly dead last among our global competitors into that top three and keep us there. That means designing a tax code where our local businesses can compete and win anywhere in the world, especially here at home. Were going all in on growing middle class jobs and growing middle class paychecks. Lets begin with a bipartisan issue. For years here in this room and back at home weve heard from our businesses large and small about the importance of investing back into their workers and into their future. Thats what led us, republicans, democrats, together to support issues like what we call bonus deappreciation and section 179 Small Business expensing. All about rewarding businesses for investing in building, equipment, software and technology. But we want to go bold per. The house blueprint calls for a shift from an onerous business tax to a simpler tax flow system. And at the heart of that we would provide for a fuel and immediate writeoff of all of this new Business Investment. And that investment, by the way, not only is the key to middle class and main street job growth, its key to making our workers more productive. Thats what drives wages, thats what drives america to the lead pack in having the strongest economy on this planet. So i want to start with our witnesses. So can you explain how having access to full and immediate writeoff of your Business Investment will lead you to nervous more in growth and jobs both for you and for customers, for example, and businesses who are making those investments themselves. Mr. Stephens, well begin with you. Thank you, mr. Chairman. Just as it has with bonus depreciation over the last few years for our company, we would invest more with immediate expensing. We would take the dollars saved on the tax return and invest those in more capital. When we do that we invest in research, we nervous in technology and productivity. For us that means building out more broad band. For us that means building out more fiber optics. Those provide jobs, not only the engineers who design and the researchers who develop the new systems but our proud employees who actually construct those and build those and maintain those. Theyre going to have better jobs, higher wages and therefore the entire ecosystem is going to be better off. I will also tell you eel have a direct impact on our property tax liabilities so the state and local county governments will get more revenues because we do pay property taxes, sales taxes. So it is a virtual cycle of Economic Growth that comes out of additional business fixed investment. Does it make your customers many are sml businesses and other businesses, buying this technology, really upgrading your equipment, your technology, all of your technology can be expensive. Being able to write that off immediately does that help Small Businesses to be able to invest more in the type of technologies youre offering . Many of our vendors are Small Businesses, diverse businesses. So they would be immediately helped. It would help them generate their business. And from a perspective of being what i think most people consider a large business, Small Businesses are some of our best most wonderful customers. We want Small Business in this country to succeed. Its good for the demand on our services. Absolutely. This is a complimentary situation, not one that is in different views. We want Small Business to have that opportunity to succeed in this environment. Thank you. And so that leads to familyowned business who both invests in your plant but customers who are buying your products as well mr. Mottl, your ability to write off the investments Going Forward for you and your customers, whats the impact in. Thats really important for us. Since 2015 my company has invested 3. 5 million in new equipment and plant. Right now were doubling the size of the plant, putting on an addition. All of those types of things, immediately expensing them that would really help us. Our sells are just under 10 million. So from a perspective of a percentage wise within well really investing in the future. Thank you, mr. Mottl. Mr. Farr, manufacturing, if you want to stay competitive youre got to renervous all the time in your business. Its expensive. And your customers are immediately being able to write off from their taxes. What impact does that have . A Significant Impact on our returns. Gets our cash back to us. Which gives us more money to invest down the road. We have invested over 3 billion in capital. That drives growth, productivity, jobs. But having a return on that, obviously at higher level and the cash coming back into the corporation gives us more money to invest capital and that will drive a farther Economic Growth overall. Mr. Peterson, your insight sort of looking at broad range of the economy but the technologies and services that you sell as well. Whats the impact of being able to immediately write those down and make those new investments . Whats most important for us is it would allow tuse keep those jobs in the u. S. Theres a competitive environment because other countries have such low tax rates. We received Relationship Management calls from singapore, ireland, where they come visit us to ask us to move those jobs to those countries. They require mathematicians, quantmists. They want that intellectual property overseas. These types of tax changes will allow us to continue to devem our products and services in the u. S. Well invest in the u. S. Weve invested in large operations in sharlets vill, texas, colorado and new york. This would insure we would continue those investments in the United States. Thank you. Mr. Ratner, thank you for bringing your criteria forward on pro growth tax reform. Bring those solutions and principals. Are extremely helpful. You work and see many clients whether theyre in manufacturing or technology, small or Large Businesses, investment growth. Growth that comes from that investment. So your view on unlimited immediate all size Business Investments in those productive investments, what impact do you see from this provision . First i would certainly concur with others that the rate of investment in this country is below what it should be. Secondly i would certainly concur with the notion that if you gave someone immediate write off that they would invest more. Thats fairly obvious. If you give somebody money to do something, theyre likely going to do more of it. But i think the focus on this provision is excessively narrow in terms of what is effecting investment in this country. When i spend time talking to ceos and companies. They might invest more but theyre faced with the fact that demand is quite weak because wages havent gone up. And so theyre investing more money in other parts of the world where they see faster growth and more demand. And so the question of investment has to be viewed more holistically. Or how do we get growth here and this may be one piece of the final solution but it is not the holy grail. It is not going to single handedly solve investment chal fgs in this country. I agree. We have to put together a number of pro growth provisions but investment part of this is key to middle class growth and the estimates of the house blue print is that well raise after tax wages by 4 or 5,000 so thank you all for those responses. Mr. Neal, youre recognized. Mr. Ratner, let me begin to thank you for your leadership and to recognize the success of the automobile restructuring that took place during the midst of the recession. I remember having extensive conversations with individuals like mr. Leaven at the time and our greatest fear is that the r and, d would have been moved off shore perm nnltly. So i think we begin by thanking you for what you were able to do to turn around that industry and thank you for your government service. As i noted in my opening statement. My priority for tax reform is the middle clas. The middle class is contracted in the United States over the last two decades while those at the top have done better than ever before. Thats not from a democratic manifesto. Its from the Pugh Foundation and many think tanks. Working families send a strong signal. Theyre tired of a tax code that favors the big over the medium sized incomes and greater concentration of wealth again at the top. Theyre anxious about a very uncertain financial future and the true winners of tax reform must be middle class americans and their families. In your testimony you agreed with the position that was offered that its critical any tax reform plan be focussed object helping middle income families. I hope you will also have a chance to touch upon the need for greater retirement incensives in our code. So addressing income stagination and rising income and equality is a big problem in america. Based on your expeer yngs, wed like to hear from you. Thank you, congressman neal. I think any tax reform package needs to be a balance. It needs to address a variety of needs. Weve talked a lot about investment but youve talked about the situation with the average american. I dont agree that while there would be indirect effects on average americans of investment tax benefits, i dont believe that thats the most direct way to help them. I think its a form of trickle down. I think when you look at the tax proposal thats been made by the administration, youll see its very unbalanced. It has not yet been scored but president Trumps Campaign proposal was scored and 83 of his tax plan would have gone to the top 20 of americans. And the middle class average american would have got a thousand dollar tax cut. Thats not my view of a fair and and balanced tax cut. So i think more of the equation is to give them more of a tax break so they can get our growth rate up to a higher level. With retirement savings, thats a whole other level. 401 ks and iras have helped and also faced to undersaving and we need to think about a comprehensive restructuring of that whole program. Thank you. Thank you, mr. Neal. Youre recognized. That can you, mr. Chairman. I think its safe to say that all of you have expressed some level of support for moving to a cash flow system and one of the opportunities we have during hearings like this and this being one of the first hearings were going to have is having folks like yourselves be able to speak before the American People here in congress but begin to talk about these switching from this acruel system to a cash flow system and all the benefits that will do for the American People in terms of not only growth in the economy but also wage growth and why dont we just start with you, mr. Stevens. Moving having a i mean one of the Largest Companies in the United States, the opportunity to go from comp lnlicated, a cr Accounting System where im sure you have an army of lawyers and tax accountants. Switching to a cash flow system like this, i think this is going to give your folks that work with you some real opportunities to get away from trying to navigate the complicated tax code and begin to look at where best to invest money for your company. I dont know if you could expand on that and explain some of the opportunities this would give you. Certainly simplification of the process and that it would be provided to provide some balance. We file over 250,000 tax filings a year in the United States and yes, we do have a large collection of professionals who work hard to make sure we live up to all those laws. Quite frankly, for our perspective, the incentive to invest in capital would be the most effective way for us to increase our investment and through that higher more people, generate more jobs through our supply chain and generate more research with Technology Development and improve the wages of our employees and of their peers who work for other companies and as that goes through the system, it would generate demand for our services and thats the real answer for Economic Growth as the Peer Companies that there represented today from all sizes, they would put demand on our services, put demand for labor and for wages and you would see growth of a significant level we believe for all. And for us it would generate on the top line. So yes, there would be simplification. We have resources. That simplification aspect is much more beneficial to the small and medium sized businesses. Theyre very important to our company because they makeup some of our best customers. Sitting next to you is a Small Businessman from illinois. I have a district that has a lot of Small Businesses and i think having you here today sitting next to one of the Largest Companies in the United States shows how we can get big businesses in america and Small Businesses to agree that moving to a cash flow system would be beneficial. Can you walk us through the opportunities moving to this system would give to a Small Business like yours. You pointed to the relationship. Id like to point out at t and the telecomindustry was one of the biggestroom to our company. If my big customers are healthy and buying parts and pieces and product from me, im happy. Thats tax reform for me, making my big customers competitive and able to do business in the u. S. In relation to the tax that were talking about the cash flow tax. Ive seen some models that have a concern for Small Businesses but i would ask you to consider working for a border adjustable profit tax. It would maybe focus more on profits and tax flow. Anything that simplifies, reduces and gets my customers happy and doing business for me, its a great tax reform for me. Ive got a few seconds left. I have to agree. Having healthy Small Business is important. If i can redirect money from doing tax forms to engineering and new products and innovation, that will grow the economy because thats productive assets that go into growing the economy. Productive but id rather make a new product. Thank you very much. Thank you. Yield back, mr. Chairman. We would never say that. Mr. Leaven, youre recognized. Thank you and welcome to all of you lawyers and nonlawyers. You know i think theres a general agreement we need look at the Corporate Tax structure and the Obama Administration did so and i think the question is how and in what environment. I just want to read from a new report to just a couple months old to chicago booth entity. And i quote. I find that the stimulative effects of income tax cuts are largely driven by tax cuts for the bottom 90 . And that empirical link between employment growth and tax changes for the top 10 is weak. Too negligible and even for a Business Cycle frequency. If policy makers aim to increase Economic Activity in the short to medium run, this paper strongly suggests that tax cuts for top income earners will be less effective than tax cuts for low income earners. Overall the results not only suggest some skepticism for trickle down economics but they provide evidence that supply side tax policies to do more to consider the relative effcase of tax cuts targeted lower in the income distribution. So i just want to mention that when we talk about comprehensiveness, lets keep in mind whom were trying to benefit. Jobs. Theres much talk on the republican side about middle class. The trump proposal is the opposite of it. Also i just want to make a comment, mr. Stevens. One of your statements. Our current tax system also harms workers. Up to 75 of the Corporate Tax burden through lower wages. I just suggest there be some caution because Corporate Tax profits have increased dramatically while wages have staginated and i think theres much doubt, if i might say so about that reference. Let me just say a word about bonus appreciation. We tackled that a couple years ago and crs made clear that the efficacy made clear it depended on its being temporary. And thats why it was enacted in the first place. As a boost during a recession and so when you essentially adopt it in a nonrecession period, a crs casts immense doubt on its efficacy over the longer run. And i mention this because i think we need, on a bipartisan basis, to take a hard look at these issues and not kind of just put them throughout as if theres some kind of a magic wand. The crs essentially says it is not and he left bonused apprec yashz out of his proposal all together. None of you, except mr. Rattner have talked about the impact on the deficit and how we pay for a Corporate Tax reform. Are you concerned about this . Or are you among those who say threat flow. If the deficit increases, it will essentially bring about Economic Growth . Just quickly. Theres just a minute. Are you worried, each of you about paying for corporate and other tax reform . Representative, if i could start. Certainly we are, as a member of the group of companies that operate here in the United States and part of our this is our home. Absolutely. Thats why in our comments we talked about trade offs. Comprehensive reform. There will be trade offs. We understand that and that is just something were go having to to work through so we come out with a complete and workable package. Are you concernconcerned . Yes, representative and i want you to have your cake and teat too. I hope that will answer. I would say yes, im concerned about the deficit as a an individual taxpayer and ceo and i look for trade offs back and forth to make sure we do this fright the economy on a balanced basis. So i think its very important. All time has expired mr. Leaven. I would add the blueprint is designed balanced in the budget. Youre recognized. I want to echo your comments about full expensing and how important it is and thats why ysk rr been an advocate of making 179 bonus appreciation. Im not going to take the bait and ask about bonus appreciation. Business investment. As all of you know declined last year for the First Time Since the recovery began. Not good sign. So before i ask my question i want to thank you all for sharing your experiences. But one of the things that struck me as so important is underlying debate and letting the perfect be the enemy of the good is the cost of delay. Now we can pick apart any piece of this but the cost of delay is so important and how do we put a cost to that delay . And as the rest of the world has reformed and lowered rates and taken our jobs, we continue to let the perfect be the enemy of the good. Id like each of you to comment, if you could, in terms of jocbs Economic Growth. What is the cost of delaying . Weve been talking about tax reform on this panel for years now and we continue to let perfect be the enemy of the good. Whats the cost of delaying this again . Lost wages. Its underemployment. Participation rates in the work force that are at historically low levels. And middle class wurngers are probably the bulk of your employees. We believe were the Largest Union employer in the country. Over 120,000 represented workers. Were proud of them. They would be the largest beneficiaries of the additional Capital Investment because theyre the ones who do much of that work. So the cost of delay impacts the middle class worker . Absolutely. The delay cannot happen. We saw what happened with the markets yesterday because theyre concerned were not going to get things done here. Ive invested all that money in my business and im expengting to be able to pay back my investors and the bank. They want to start saving and getting ready for the future. Thank you in ohio, by the way. Were moving ahead because im assuming this body will get tax reform done in ohio. But the cost of delay is lax of inovation, less jobs. We look at how much growth is going to be and every time its delayed we push that investment out and so it does have a real impact on people, how they hire, investment, new product. But i believe we will get new tax reform and thats why were moving forward with ohio, wisconsin and missouri right now. Because i believe this body understands the real importance of getting tax reform. So, were betting on you. The cost of delay is also the cost of investment. If the delay is not to get a lower rate and not get a territorial system, were going to see more Companies Looking for some sort of inversion, not bring their cash flow back from off shore. One company did a 3. 3 billion off shore investment. We have no way to get that money back to the United States. Dont rueen the picnic now. Im not going to ruin your picnic. Thank you. We can all agree on your question. I dont think theres a lot of disagreement probably on exactly what we should do. But i dont think any reasonable person could agree that having done nothing really for 30 years in terms of comprehensive tax reform has cost us millions of jobs, billions of dollars and so on. Every day i read about another Company Moving itself or its jobs overseas, it upsets me because i think we could be doing something about that right now. Thank you, sir. With that agreement, i think we ought to stop that here. Just so you know. Thank you very much. Thank you, very much, mr. Chairman. Mr. Rattner, i want to join representative neal for thanking you for your service to our country. I am very concerned about fairness and values and comprehensive tax reform. Some have said this is a once in a Generation Opportunity. I think we must take our time and we must do it right. We must get right. As we consider tax reform, do you think it is important to consider the impact on working families and future generations when reform tax policy will be considered reforming the tax policy . Yes, i do. Think its important. As i said i think its just as important getting comprehensive tax reform and removing the loopholes and avoidance techniques for individuals and companies as well as getting the Corporate Tax system fixed, i think it needs to be fair and have a positive impact for the average american. I think to have a 5 1 2 trillion dollar tax bill doesnt seem fair to me. I think there needs to be fairness. As i said earlier, the comments on Business Investment, i understand why theyre being made effect the supply side principal. Thats all good but we need do things on the demand side inputting people in a position to earn higher wages and get the economy growing faster. So while i do share the view that we need comprehensive tax reform, i am very troubled by the proposals on the table both from the not just fairness but stimulating every side of our economy, not just the investment side. Do you have any recommendation what we should be doing . Look at the panel. Just look. All white men. Where are the women . Where are the minorities . Where are the low people . Would you like to respond . From at t, we take great pride in the diversity of our employee base, our customer base. Weve been recognized by many, Many Industries for our accomplishments. We have a long standing supplier diversity program. We spent close to i appreciate that. But i dont see any african american, latinos, asian american, a native american. I dont see any women here speaking up or out. On what they need, what they want. A country is a very diverse country. Our forefathers and our formothers all came to this great country in different ships but we all in the same boat now and we should look out for each other and care for each other. Thank you, mr. Lewis. I think we agree on that point. And recognize that our democrat colleagues on the committee have an opportunity to bring witnesses to this table as well. I think its important for us yes. And made that choice. If i may. Not at this time. Mr. Chairman, would you yield . Yes, i will. The break down of the witnesses, which is a pretty good discussion i think we wld agree but the break down of the witnesses is not reflective of the proportions from the two political parties. So it is traditional to take this type of approach. My only point is this as we talk about middle class workers, we invite our witnesses here, we recognize they represent a Diverse Group of americans that mr. Lewis has championed beautifully for over the years. Mr. Chairman, would you yield . Not at this time. Youre recognized. Thank you, mr. Chairman. Thank you for your testimony today. Bottom line is were trying to create a tax code. Youve all touched on all the members on the panel. And would allow job growth, create jobs, increase paychecks, grow our economy and help hard wurngi working americans. We all agree that tax code is broken. Its too complicated. So i want to touch on a question that mr. Teeberry highlighted and touch back to mr. Lewiss point if i could. You talk about the impact of our out dated code on your business and i just would like you to elaborate just a little bit more. On what an updated code would do mean for you and more i think importantly what it would mean for your employees, for the hard working americans mr. Lewis has referred to and others prior to my questioning. How is it going to impact your employees . And its been mentioned a little bit but if you could dive into that question a little bit for me. As i described before we have been a company thats been around 150 years. We developed our products and services which create intellectual property. We produce goods and services. Our intellectual property is registered and owned in the United States, prince pale in new york. When we export our services, we pay full taxes in the United States and in the new york state. Our competitors are have their intellectual property and capital registered off shore and they pay very low taxes. When they sell those prodenucts and serves in the u. S. They do not pay the same taxes. New companies being developed today, they begin their development of their company from scratch with a tax policy and they register their intellectual property off shore immediately. Put a Service Center in dublin or singapore. They own it off shore and then they sell it back to the United States and they dont pay taxes on it because the royalties go back to an off shore business. We compete against companies. For americans today that there watching if we reform this tax, a territorial tax, we will invest more in the United States. What does that mean for the American Worker . What that means is that we will create more jobs. Are they going to be higher paid jobs . All kinds of jobs. We have jauobs all the way from lower end jobs. And these are not just jobs for White American snz. These are jobs for people all over the country. Every american citizen, every american whos working in this country will benefit from this tax code, is that correct . Every american will benefit. Every time we start a new operation, we have to build facilities, get organized in that regional section. Its a great benet for the entire spectrum of u. S. Workers. Great. All of you agree . Mr id like to follow up on your questions to tax reform. In your view and i know weve had lower corporate rates, territorial simplify expensive comprehensive. What is, in your opinion the most important thing we can do when it comes to tax reform . From my perspective the lower tax rate is the most important thing and i know theres going to be a lot of trade offs, pluses and minus but i think its important to have the lowest tax rate. That will help all employees. Weve increased our wages year by year by year. But theres been higher taxes, higher cost of benefits. 20 seconds, the importance of perm innocence. I mang ke decisions over thr years, five years, ten years. You need certainty to help americans keep their jobs. Thats why im betting on ohio right now because im certain you will do it. Thank you, mr. Chairman. And thank you to our witnesses. This is a troubling time in american history. Our National Security has been jeopardiz jeopardized, our democracy is threatened. Hopefully the appointment of a special counsel is a first step to seeking justice and to assuring americans that our syst system of checks and balances is not entirely broken. This is related to the willingness of so many to avoid a growing tower of trump travesties. Some see him as the only ticket to more tax breaks and theyre willing to pay almost any price to get them. Today is also noteworthy as the first time ever, after almost an entire year, that anyone has come forward in a public hearing anywhere to justify this self styled better way tax plan. Now i certainly favor Public Policies including tax policies that there designed to encourage entrepreneurship and grow jobs here in america and we know what some of those Public Policies are. That if we invest in our work force in education and job training for jobs that there going unfilled, we can become more competitive. Those are the very programs that President Trump proposes to slash. We know that inwe have a competitive infrastructure, instead of trucks backed up on our highways and trains on out dated systems, like our competitors in europe and asia, we can be more competitive and grow our economy. But some of those are programs that President Trump proposes to cut and the rest of the ones that hes never got around to making a proposal on. And the best way to grow our economy at the least cost is comprehensive immigration reform. According to economist and business groups across the spectrum. But that doesnt fit the ideological structure of this administration. As for tax policies, well, apparently our tax code is out dated. Its full of loopholes, it doesnt work very well. But the witnesses that there before us today are from companies that seem to have done pretty well under that system. And they tell us today that if they pay less or no taxes every time they invest a dollar at home, theyll begin investing more at home. While i question the logic of that, i think they offer many valuable insights, a number of which i agree with. I think that we need a tax policy that encourages jobs at home and when the chairman of our committee tells us there are proven ways to grow our economy. I think what these hearings have to be about is proof that this will actually grow jobs and that proof has to come from some people who come before this committee who are not telling us basically that they think giving themselves a tax break is a good thing because i think everybody will agree to that kind of conclusion. As far as whats been testifying to here today, we do need a lower tax rate. Of course if we lower it to the lower 20 persen tile, that will be lower than what theyre paying today. We need one that involves trade offs. It is repleat with tax loopholes but we dont have a list of tax loopholes that would be closed today. Only vague talk of trade offs and we dont need tax cuts, we need comprehensive reform. This is not the first tax cut this committee has considered. Weve already approved in the house an almost trillion dollar tax cuts that will provide most of its benefits to the superer rich and a few corporate interests like the fa pharmaceutical industry. He promised there would be no tax cut for the upper clas. But the one page that has been presented more recently is chalk full of candly for those at the top and very vague promises for the middle class. One analysis of it suggests the top 400 taxpayers will get 15 million each. We need to be working on a comprehensive tax reform that provides benefits to the middle class and that does not raise the National Debt. The committee has said thats their position. That has not been mr. Trumps position. And coming together on that will be critical as we move forward. All time has expired. My good friend from texas just argued we need a lower tax rate and criticized the people advocating for a lower tax rate. Theres an old phrase that says when the bulls fight, the grass loses. So who loses as we dither under the current tax code . The wealthy are not suffering today. Theyre doing well. Its the folks at the lower end of the economic spectrum who suffer if we ring our hands and lose a once in a Generation Opportunity by pursuing a perfect tax code which is a complete illusion. Thats the unicorn of 2017. What we want is a good tax code. What we want is a tax code that mr. Lewis can celebrate when he says lets get it right. Okay. Lets get right. So one of the things that we need discuss and really litigate publicly understand what it means to get right, two of you mentioned in your testimony and im interested in exploring this. What is the value of permanence. We often talk about renting things verses buying things. We put a premium on owning something. And it would seem to me theres a real premium on perm innocence. All jouf been exposed in terms of marketplaces and so forth. A permanent tax policy verse s temporary tax policy and put this in the context where we have these tax extenders and temporary policy that fade off in 24, 36, 48 picket number of months. What is the value to you and further on down the line because you told mr. Rietger what happens. How important is permanence . Its extremely important. Looking at three, five and tenl year plans, particularly to Companies Like ours that provide benefits overliterally decades. Knowing what the rules are, tell us what the rules are and we will obide by them but knowing that allows us to make consistent, significant material Capital Investments and allow for the demand for jobs, demand on our suppliers and quite frankly with the demand on those jobs, wages go up. Its simple supply and demand. Its a cycle that continues to repeat itself as they buy more mobile services. Thank you. Thanks. It is very important to have consistency and importance with regard to the rules. I cant think enough about permanence. You have to answer to your constituents. The business doesnt vote. You talked about the success of businesses. Ive been fighting for my life, for my business as my customers keep leaving this country. I gelt one industry figured out and then they leave and i have to find another and another. Its been a tough battel for the last decade or longer. Its so important to get my customers back in this country buying products from Companies Like mine. What twd mean to Emerson Electric if they gave you a tax code you could rely on for more than a decade . The new facility in ohio are replacing a facility built in the 60s. Its going to last for 20 and 30 years. I have the world to invest in and i have a choice to look at. Who offers the best incentives, who gives the most consistent tax rates and i look at this world. If you do a short term one time accelerated appreciation impact, you have a surge of one year of capital and then it dies. That is not a longterm strategy and thats why i need think about two, three, four years. Im thinking about camtle invest lts right now three years out and where im going to put that money, where am i going to build that next facility. And i need for at least 10 years for my thought process. Mr. Peterson, just quickly. Permanents creates certainty, certainty creates risk. I agree. Amen to that. I yield to that. And he got in under the wire. Well done. Mr. Thompson, youre recognized. Thank you, mr. Chairman. Thanks to all the witnesses for being here. Im glad were looking at doing comprehensive tax reform and this morning i was making notes to myself the things that i think are real important and number one is comprehensive reform and thats what this bill needs to be, not simply a tax cut bill. If we do a tax cut bill and ignore the reform, we lose and the American People lose. I think it needs to be paid for and i think all the witness recognized the importance of that and i think we need to pay for it in real terms, not just there needs to be trade offs, we need specifically pay for this. We cant add to our National Debt and i think its important its bipartisan. Good things arent good unless theyre bipartisan and weve all experienced what happens when we try and do it some other way. We need make sure as lot of my colleagues have mentioned that we really hone in on, focus in on the middle class. That is extremely important and i added one bullet to my notes when i heard you speak and you mention the desire to lower the payroll tax. I wrote down it shouldnt hurt the middle class and i think we need to remember that payroll tax is how we finance Social Security. And unless you have some way to insure that Social Security stays strong, if we do tax reform that takes away the funding for Social Security, that hurts all of our constituents and i would hope we all recognize how important the Social Security system is for all americans. The middle class have been struggling. Incomes havent kept up with expenses. We all know that. I reference a recent study done by the university of minnesota, chicago, princeton and the federal government. They found a 27yearold man today is making 31 less than he would have made in 1969. They go on to say that hes unlikely to makeup the difference in his lifetime. So as we turn to tax reform, we really have to focus on those middle class folks. These numbers, these numbers dont jive and especially if you juxtapose that with some of the numbers many of our Corporate Leaders are bringing home. Its not equitable, its not fair and it needs to be addressed in our bill. And tax cuts that are not tax reform are wrong. And tax cuts that arent paid for dont generate this pan sia that some think that it does. We know from the 80s, the early 2000s and in kansas that tax cuts dont automatically pay for themselves and we have to recognize that. I have a question for you. Can you explain how these large increases to the debt, even for policy that we might otherwise all agree is good policy can become a drag on the economy as a whole . Sure. There have been many, many studies of this done that as the size of the federal debt goes up and the interest burden on the federal government goes up and the crowding out of private capital occurs because inertest rates rise as the federal government borrow s more and more. It seems like the whole panel agrees that whatever this committee does needs to take account of its impact on the deficit and thats where i have a problem with what ive been hearing. I havent heard how were going to pay for all that. And the second thing if i could make one other comment that i was struck by congressmans comment. Of course, as i said in my opening remarks, if you cut depreciation, there will be more investment. How mump more . We dont know. Will it justify it . We dont know. Would it be better spent on inf infrastructu infrastructure, job training, education . Because the amount of money the federal government has for any of these things is limited and we need to make sure its spent effectively and look at it across the entire continum. If we cut taxes for the rich and for corporations and we pay for that by adding to the National Debt, what does that mean to the middle class families that we represent . First of all, rarlits a mat of immediate fairness that youll be givering a benefit to the upper class and very little to the lower class and the middle class will have to pay the burden of paying for that somewhere down the road in the form of higher taxes if we dont keep our debt under control. Going eventually cost them money . Going to eventually cost them money. We have a diverse background on this committee. I built two pretty good size companies. I did want to touch on i think we all agree we need to be more competitive on the corporate rate. I want to focus on pass through entities. Ysk when you look at corporate rates at 35, theyre not competitive. If you add state income tax like states in california, it can be 57 . Makes absolutely no sense. So id like to ask some of the panelists your thoughts on lowering those rates where theyre more competitive, getting it down to somewhere near the corporate rate. I dont necessarily agree with 15 , but the difference that would make in terms of growth, jobs and raising wages. So ill start with the gentleman. I think a lot of them are paying around 34 . If we go to 20 25. I think its important that theyre more similar and not so dissimilar and penalizing to the Small Business. On jobs, the more we can invest, the more we can grow, the more we can hire. Im involved in Training Programs, stratraining them ford jobs. We need this kind of growth and this kind of opportunity. One of the things thats always concerning to me, especially on pass throughs. You have to happen to make 800,000. They might take 150 out. The balance of the money goes in to expand the business. You represent a large industry. A lot of these pass through industries, whats your thoughts by the fact they can keep a little bit more of what they earned in the business. What difference is that going to make . We have 30,000 people in the United States across all the states, both democrat, republican. Plants aeeverywhere and we e Small Businesses to supply to us. If theyre not healthy, theyre not going to have the most productive equipment and theyll lose business as we take it elsewhere. So the Small Business tax rate needs to be closer how to Corporate Tax rate and thats been with one of the big issues the last couple of years. Theyve not had the money to invest to keep up with us. So were looking for other people to supply us. And i want to agree, make a comment that we employ not only high price people, we have all Different Levels of people employed across this company. I think 93 of the enterprise in florida are pass through type entities. Mr. Stevens, would you like the add to that . Quite frankly the competitive issue applies across the board. High tax rates gives them less opportunity to generate jobs. That is good for the overall economy and for a Large Company its good for the Small Business vendors, suppliers and customers to be very healthy. Theres actually something out in the last 10 years. Lately we have more businesses closing than opening. So we have to have a tax code that doesnt penlize people. If you disagree. My thought is it can be up to flour lot of pass throughs and state income tax, im sure illinois has a substantial tax. Its a big number. Whats your thoughts . Id make a couple of other points. Lower taxes are good for everybody if we can find a way to pay for it and it can be fair. First they chose to become pass throughs. They could have become subchamnter c corporations. Secondly, while the number by number pass throughs are vastly Small Businesses in terms of where the income is generated, ive seen studies that between 40 and 50 of the income is generated by Small Businesses and i have many in the private equity world where structured as pass throughs and they do not need a tax cut or deserve one. So while im sympathetic to the genuine pass throughs, i think the devil will be in the details of you structuring something without benefitting a lot of rich people. What id add is it also makes these businesses much more attractive from a credit point of view. And that kind of cash being able and capital in the business helps that very much as well. Mr. Larsson, youre recognized. I want to thank all the witnesses as well for your expert testimony. As rich neal has spoken, were very concerned about whats happening to the middle class. This is a generational opportunity for all of us. So we want to make sure we get this right. In fact the last time generationally we took this up it was labelled by one author the battle at gucci gullch and we dont want to see a return to that. So my first question. I have two. Relates to all of you. And thats a commitment. Our most recent history in the committee with arerespect to a major reform had to do with health care and we believe on this side strongly that we need return to regular order and that we need to have witnesses like you and an open process throughout where both sides actually participate in the drafting. Because i think as many people have pointed out, without that were not going to get the perm naen naens or the long term consistency that you would like. And so id ask you, all of you and if you give just a yes or no answer. Would you be in favor of more hearings, open where we get in this arena of the vitality of ideas where we can exchange and work through these or do you think this should end up in some closed door process . Its a pretty easy answer. My expertise is in taxes and financial matters. Ill respectfully leaving that to those to talk about the health care process. Given thats your exper tees, wouldnt you like to see the open exchange of ideas . I would hope that is going on today and everyone appreciates open ideas. Dont you think we need more of that . I couldnt agree with you. I hope that is what were having today. Id like more dialogue. Thank you. Hopefully you dont consider this harassment. Its special love. Mr. Peterson. Im very pleased that today youve opened a process of starting hearings. I think getting more and more data and analytics about the impact of the different tax proposals is critical and how you do that is valuable to have more transparency. And your charts and graphs which have been very illustrative in town halls th s had and i can anticipate you would be in agreement about the openness, you mentioned three things that you would if you could dwell on. You talked about how excessively narrow this proposal was and if you could elaborate on that. The other was you said the need for this to be more holistic and as in the embrace with a number of the questions from mr. Lewis to thompson about making sure that this is the code has got to be more distributionally neutral. Thank you, congressman. Yeah, i think those three points are all interrelated in the sense i think that to simply focus on one or two provisions effecting business as the center piece of tax reform is excessively narrow and as i said a few minutes ago i think the committee should be and this gets to your point about openness. To congressman lewiss point, hearing from a wider variety of people may be great. Were all business men. And there are a lot of other people throughout who will have useful views for you as you think about this. I think each of these provisions or pieces of this are just a piece and i think as part of the effort if i were in your shoes, i would be trying to balance, look across the whole spectrum of tax policies and things within the jurisdiction of this committee and come up with a package that is balanced and fair and in its entire haety addresses the issues weve talked about which are the complexity and the fairness issues. And thats why yousk rr said its excessively narrow. Its excessively narrow. And i commend the chairman and i know the people on the other side of the aisle want to get to this, theres broad agreement and we had great precedence set by camp, who i know people on both sides of the aisle admire his work. I think if were able to sit down in this manner and providing as much love as mr. Far would like, that we are able to create an opportunity to move the country forward. Thank you. All times expired. Mr. Smith. Thank you, mr. Chairman and thank you to our witnesses here today. I think this is an important discussion, conversation that we have. I appreciate the perspectives that you bring and i think this panel represents multiple perspectives as well. I think as we sift through this i hear as a representative of rural and remote nebraska that theres a frustration that perhaps just waiting to punt perhams is not the solution, whether its fixing our health care system, whether its reforming our tax code. There is an understanding that and i would say a bipartisan understanding and even consensus that our country is uncompetitive in the world as it relates to our tax policy. I think it is very important that we come to that realization and move on it in a permanent way as weve already heard. I hear from constituents who find the death tax, for example, an unfair tax, inherently unfair. Double taxation and there seems to be an idea in washington that if you narrow that down to a few enough people, then it makes it fair. I disagree with that. There will still be individuals harmed, certainly Family Businesses harmed and i think a businesses particularly in agriculture that are not a wash in cash andly quid ditty. And i imagine there are many family owned businesses that would fall into that category as well. So i think if we focus enough on doing the right thing for the right reasons, we can get this done. But i can tell you it can frustrate me when i hear various arguments of why not do it that i dont think are certainly as important of reasons as why we need to did this, move forward, involve as many people as we can and thats what weve deny doing. I know the working groups that weve had over time have been instructive. I speak personally on that front of how instructive that was to hear people out and various sectors of our economy. So im anxious to move forward here. And i think that this time and this conversation is important. Im wondering if our panelists could perhaps explain to me, i know that emerson points to ohio for some expansions. We have facilities in nebraska, not necessarily in my district that arent necessarily headquarters for Large Companies but we have manufacturing plants, various locations of Larger Companies perhaps. I was wondering if our panelists in terms of manufacturing or services could elaborate on what tax reform might do for individual locations, satellite locations or facilities and their employees around the country, perhaps starting with mr. Stevens. Ill give you just a personal experience i sat on the chamber of commerce in tlas and what were seeing is an extensive number of businesses moving into texas because of the favorable income tax rate compared to other states. So what we are talking about here today from a federal policy is happening every day amongst our states. So i would suggest to that you this overall tax reform bringing down the top tax rate, providing an intent e sentive for investment will generate jobs across the punt as it will allow all states to be much more competitive with their foreign competitors as they exist today. Im from illinois and we have a unique example in no, i, some budget issues there and business are leaving our state as a result of it and theyre concerned. So i think it speaks to its a great example that when you do tax reform if we can get it done in the u. S. You will bring businesses back to the u. S. To all states. And i wanted to make a comment there was a comment made about switching our tax structure. Id love do that, it could contributory negligence air huge Tax Liability do that with the we have a c corp, an s corp, id love to get them all aligned to have the fiscal year end on the same date but do that i striger Tax Liability for cash that i dont have. Theres a comment made weve had to pay taxes some years. Weve triggeredered a Tax Liability in unusual years we didnt make a profit but we strigereded a Tax Liability. And these are the crazy quirks in the code that we need to address. If as i look at at t as they increase their investment, infrastructure of the internet and the uses that we use over the technology of their services, that will increase my investments in those particular areas. So as they invest in texas, i invest in tfl. If they invest in minneapolis, i invest in minnesota. So what i look at is the tax structure of each stated. When i go to illinois i get concerned about the health of illinois right now. So as i look at the very states and where i want to invest, its around the policies relative to the state, the tax structures the the benefit of the local governments and how they help and work with you. So thats why we make those vefments. But it also pays off of what at t does or what we do, we help each other for those Infrastructure Investments. Mr. Peterson. At the base of your questions about the competitiveness of the u. S. Economy, we have the best university stm, the most innovative people in the world, we have a rule of law, we have an energy boom which attracts many new companies around the world looking at that the competitive advantage. But we have a tax system that disadvantages us. Each state obviously has their own competitive advantages and theyre clearly going to be looking at that, but lz so some different advantages we have today but we lose out on many of them because of the broken tax system. Thank you. I yield back. Thank you, mr. Bloomen our, youre recognized. Mr. Peterson, you talked about many of the advantages we have in the United States in terms of our economy. Im struck that one of when you were talk about the various Infrastructure Investments one of the problems we have is we have a country thats falling apart and were falling behind. Those of you who were involved in the International Economy realize in terms of roads, transit, air investments, United States is sadly lacking, sadly lack. We just had another report from the American Society of Civil Engineers that suggests that in five years we havent improved the ratings of all the things thats just the price tag got higher. In the past weve approached both the Previous Administration and previous proposals for tax reform had a little bit of infrastructure stuck in or some people think repatriation can be sweet end by moving that back into our woe fully ib adequate infrastructure spending. Theres admittedly a little bit of disagreement between repay the eighted dollars and who benefits and some people have different ideas for it. But one of things and mr. Farr i would start with you because governor evening gler and the National Association of manufacturers supported legislation i had to finally raise the gas tax after 24 years, which wouldnt add to the deficit, which would put millions of people to work from coast to coast, creating jobs in every single state, every single city, and maybe wed be in the process of learning how to legislate again, do this, you know, kind of build those flex those legislative muscles, woe could have panels like this for a week and listen to the president of the afcio, the president of the u. S. Chamber of commerce, the president of the contractors, governors, South Carolina where the Legislature Just overrode a veto of their governor for raising the gas tax joining 23 other states that figured out how do this which we used to do on a bipartisan basis. Now, i would start with you, mr. Farr. Do you think there would be any advantage to maybe our taking a little simple tax that anybody could understand and in fact it could be even shorter than the president s tax proposal, that would get the trillion dollars that he wants to spend and that the Senate Democrats agree on that number and get started . As a manufacturer in the United States and a manufacturer across this country, i have three things. I like a simplify our tax structure to make it more competitive globally. Infrastructure is competitive we move tough by roads, rails, ports, airports, weve been pushing this for many, many years and not got ten done. We need to find investments. Youll find very few ceos of companies in the United States that would not say find the money to invest in infrastructure and i think those three things aroug round regulation, infrastructure, tax policies to make this country competitive. We compete wall those things hurting us today. We could be better. And my question was, do you still support raising the gas tax like we need it . I still support finding the funds to pay for infrastructure. I mean, i mr. Rat nor, do you have an answer to that . I certainly support raising the gas tax and i was like in the car business for a little while. I think the gas tax hasnt been raised in decades, think thats right. 24 years. And you made all the right points, congressman. And i think as a matter of both infrastructure policy and Energy Policy it is crazy for us to have a gas tax at this level and to allow our infrastructure to deter rate. Mr. Chairman, i appreciate your courtesy having this hearing. I appreciate our panelists raising important issues. I would respectfully suggest that the committee think about a simple subject that we could deal with, have three or four days of listening to experts who are in local government, state government, the various industries, hear from ups if they lose 50 million for each five minutes delay in traffic. End by end some of the republican legislators from the 23 states that have raised the gas tax to find out why twhe did it in wyoming or South Carolina. I think this is an area that we could actually find bipartisan agreement, we could actually do something not increase the deficit, just having a weeks hearing from the Trucking Association and triple a. Why do these people agree raise our taxes . I think it would be good for the committee, i think it would be good for the country, and who knows, this might be something we can break the lug jam, do something to jump start the economy, and that would help ease some of the other issues that were talking about because it would certainly increase productivity and it might be fun. Thank you, mr. Chairman. Thank you. Ms. Jenkins, youre recognized. Thank you, mr. Chairman. This has been a very informative hearing and i thank all of you on the panel for giving us your time today. Mr. Model, i know youre from illinois but when i was hearing your testimony i felt like i could be listening to a story of a Small Business owner in any small town in my Congressional District in kansas. You just mentioned in response to my seat mates question that for tax purposes your company that simply employs about 80 people has divided the company into one c corporation, two S Corporations an an llc and as a cpa who did tax plan ig want to applaud you for the krooet creativity for your back office folks and your tax team. However, i think it begs the question, should our tax code be so administratively complicated that a business like yours should have to engage in so much work in order to achieve just a workable tax rate at the expense of simply growing your business and to be more pointed, would you trade this highly complex system full of loopholes and surprises at every turn for the certainty of permanent, modern, and a simple fairier tax system that allows you to grow your business . Thank you for that question. I couldnt appreciate it more. You know, like i said, the reason we have those complex structures and, yes, in some cases it works for us in other cases its hindering us and i cannot change it ive inherited this were a 100 year old business. The krrksz corps skam from the sets and the s corps in the 90s and they were all done and reasons to do these things but id love to simplify if the id love to have one fiscal year end but i would trigger im a 100yearold company, we have retained earnings on the Balance Sheet and would contributory negligence air huge tax to do that. Im here talking about we talked about women and minorities, my sisters help me run the business and we would like to transfer own irrelevant ship to myself and my sister so we would become a womanowned business and in order to do that we would contributory negligence air huge Tax Liability. We cant afford to do that. So i would trade in a second all this mess, complexity and all the time we spend on it for a simple reduced system. Businesses are not opposed to paying taxes, transportation tax say great example, you know. I think consumption tax is an important focus. Why are we taxing income . We want income. Lets tax other things. We should tax the things we dont necessarily want to have, not the things you dont want to have. Thank you. Maybe for some of the rest uh i think its been reported that american businesses spend about 3 billion hours and 150 billion complying with this outdated burdensome tax code thats on the books. Could each of you just comment quickly about the cost associat associated with filing your returns and what about the opportunity costs, what does it mean to your business to lose that kind of time and resources . Mr. Stevens. To put it in reference or our shareholders put up about 2 hundred hundred 40 billion of capital for us to run the company and they get about 12 billion or about 2 a share in dividends. And we pay about 4 a share or 24 billion in taxes in the United States every year. Its a number thats disclosed in our annual report. So our shareholders get half of what federal, state, and local governments here doh here in the United States even though theyre putting up all the capital for the business. We have about 300 people who work full time in our Tax Department were we have a budget of about 100 million a year for that Tax Department and we file over 250,000 tax returns in the u. S. So its an extremely complex system, it causes a diversion of funds that would be available to invest into complying and we take pride in our compliance, in complying with the law. Thank you. Mr. Farr. I dont have the specific numbers but i know how many people operate doing these taxes and we have hundreds of people in the United States and around the world operating to fill out the tax reforms and compliances and making sure were doing it right. And therefore, as i said earlier, id love to take that money and reinvest it in another part of the company. Were trying continue to investigate to grow and i have to allocate those resources. What allocations is Tax Compliance and paying the taxes and all the forms we fill out. So clearly could take that and put it somewhere out and invest in the company for growth or technology for new products. Its a huge burden for us and something we have to do by law and i sign it by law. Okay. Thank you, time has expired. Mr. Con, youre recognized. Thank you, mr. Chairman. I want to thank the witnesses for your testimony today very helpful and hopefully this will be the one of many hearings we have moving forward on the complexity at take a serious run on this code first time until 30 years. First mr. Peterson and rat nor i dont think had you an opportunity to answer mr. Levins question about whether you think its important for us if we do take a run at comprehensive reform we do is it in a fiscally responsible manner we look at expenditures we can close down to help pay for a simplification and lowering of the rates tend of the day. Mr. Peterson. Thank you. First of all im looking now at the different tax plans in a way that as you work through them yourselves you willing find twiez ensure that we can pay for them, that theyre in addition to be permanent and comprehensive, that theyre also fair and find a way 10 to sure that we very pay forwards through them. Mr. Rat nor. Yes, think ive made clear my view about the fact that we should not have a tax proposal or a tax bill that increases the deficit when its when its scored using conventional means pptd we can have a debate about that but i would not want to see that be part of the equation to come up with a tax man than does increase the deficit. Theres great consensus in congress and throughout the nation tfgs long past due for us to take a run at the code because its ant kuwaited, too complicated, the Compliance Costs are ridiculous and that is an opportunity for douse it. My fear, quite frankly, as we approach this is the easy ke fault position when we get into the complexities and how difficult the tradeoffs have to be made is the congress often times lapse at the ent of the year with the need to try to get something done and just cut rates, dont pay for it, declare victory, go home. If thats where we ultimately end down on this, what would each of you think . Would that be a success for this congress or a failure and missed opportunity . Mr. Stevens. A comprehensive plan that lowers rates and encourages investments would be a win with a prudent tradeoff for all financial considerations. That would be a win, yes. Yeah. Mr. , again, if we end up just cutting rates, not paying for it, declaring victory, is that a success or a missed opportunity in your mind . I agree with you, and deps thats why im proposing that we also do a goods and services or some other border adjustment tax. Thats how you pay for it you broaden your base. And im oproowes ago offsetting credit on peoples incouple taxes that they pay on their wages. Its 15 for the average American Worker that they pay in federal taxes. I know theres some certain about Social Security. The first year its on the bottom of the statement i treed every year, the first year that theres not going to be enough funds to pay benefits is the first year im eligible for benefits. So i share injury concern about funding Social Security. Thats right. And thats why my proposal is an offsetting krt you keep the Social Security taxes on the payroll and those go into a bucket. But from another bucket, from the goods and services tax theres a plus, theres a credit. So you protect that dedicated cash flow thats so important, so important for Social Security. I appreciate. let me just move on with another question since im running out of time. One waive building bipartisan support i think in this place is something that mr. Bloomen our touched on is tying tax reform in a major infrastructure reinvestment plan. One of the leaders of the coalition were 61 strong right now, just yesterday we sent a letter to President Trump asking him to consider doing approaching t approaching tax reform way tie into infrastructure. I would ask to have that letter submitted at this time. Without objection. We do have a ton of money thats parked overseas not being utilized or being used efficiently, and one of the ideas that weve been focussing on within the new Dem Coalition is having a fixed rate deemed repatriation, dedicate for infrastructures, part of the revenue strooum stream that we need to get going on this. Do you have an opinion on that . I have not been the biggest fan of deemed repatriation. The evidence stugz wouldnt make much of a difference. Theres a lot of cash on companys Balance Sheets here now that theyre not investing. But in return forgetting critical money for infrastructure, i would support a had the deepz reoperate treeation or actual reoperate treeation tax if that money were channeled for a useful purpose to be able to get going on the infrastructure use. Yes, mr. Farr. I think the reason why they didnt have much impact it was a onetime impact. It goes back to permanent answer and i fundamentally believe if you have a policy just like our european policy everyone brings the money back you pay a simple tax on that. That money will come back to the United States and it will be invested in the United States and my perspective have that money here is a good thing. Hopefully well end up at the end of this process with a much more simplified, more competitive tax code but also fair for working families, for Small Businesses family farmers back home too and thats the goal, at least, mr. Chairman. Thank you i yield back. Mr. Paul seen it, youre recognized. I want to thank also all of the tefrz today there are has been very enlightened e evening testimony if the from my perspective i continuously hear from Minnesota Companies about the importance of having major tax reform thats permanent, promotes investment and lowers rates. And it will boost paychecks, increase jobs and help the economy. I hear thault time. We know the Larger Companies i have many my area, the general milds, car gills, the larger institutions that employ so many people. But its also these Small Businesses, these main street businesses that people have never heard of but they sore important as the engine of the economy the i think of stein we will company which say plasic injection manufacturer that i recently had a chance to tour in my district or the baldinger bakery had that i had a chance to visit that produsds the bunds for mcdonalds looking for a more simplified tax code or even the recent example example of a letter i received from dawn who writes in saying we i have once in a lifetime generation window of opportunity to unleash a Strong Economy and to repair and simplify a tax code that is helping hold back our Small Business economy right now. What i think really striking about these messages and what you shared today is there is an acknowledgement that all of our job cretetors, both big and small in this together the. And so simply put regardless of when you work at a large or Small Company were these businesses and the men and women who are work alongside them each day will benefit from itch niche a broken tax code. Were talking about lower the rates, you can plow more money into their paychecks and investments and higher wages. And so mr. Stevens, had you mentioned right off the bat this is about unleashing Economic Growth, its a key driver in investment. Mr. Molly you mentioned three different types of tax filings you have to do and the importance to level the Playing Field and mr. Farr you talked about the importance of manufacturing with twothirds of manufacturers paying under that high individual tax rate. Ill start here and weve all shared the per secretary of statetive already but it is well documented, mr. Stevens, that our current high income Corporate Tax rate severely does reduce investment and entrepreneurship as well and how would new investments made as a result of a 20 rate affect communities . How would that help communities . What might it mean to the local suppliers again, the contractors, the vendors that you partner with your operations or more importantly what might that 20 rate mean for those individuals that you currently employ or might look to hire in the future . So thank you for the question. Quite frankly its it would have a very direct, immediate, positive effect on our vendors, our smierz and quite frankly on our employees. As you put more dollars to work in a Capital Investments, you generate demand for jobs whether you generate demand for Technical Work in engineering design, architectural work. You put to work demands on research for new technologies and new services. All of those items would be have additional demand so that the supply that is out there would go to work. So more people would go to work and in the cases of many of the people, their wages would go up because theres more demand for their services the this then would start that psych that will comes back to demand for our services. Demand for mobile phone services, Television Services broad band services. So it has a virt with us cycle. But by the same token this is important, state and local government would see an immediate uplift in the prosperity because it would generate jobs and payroll taxes and sales and sales taxes, it would generate investment e meant in assets that generate property taxes and once again that generates additional demand for our services and other Large Company services. So it would have this cycle of continual growth. Thats whats so important. As we have this extremely high rate and investments are moving offshore and they will stay there for the longer term, we are missing out on that opportunity. So were acting quickly to get that done now will be an importance. So keeping headquarters here, keeping innovation here, lifting our economy for everyone is going to be a longterm boost with permanency, right . Ill just keep going right down the line. Briefly you mentioned the business in your direct that makes the bonds and the one that does the plastic. The purpose of those businesses is to make the bonds and to make the plastic parts. The secondary effect is hoax e hopefully they make a profit. And so i believe that if we help these businesses be better at what theyre doing, have more capital to do that, they will invest on make more bonds, more parts, hopefully as an offset they make a profit as well. But keep in mind the primary purpose is to did what they do and if you give them the resource dos it they will do more of that. Mr. Farr. Two, three comments we have two facilities that need the that were investing in shocka bee, were moving jobs back into the country and it will help obviously from a Technology Job standpoint it helps the education, helps employment, helps everything around that area. So from my perspective, its it really spreads out and helps the community in a big way. Just like it hurts a community when we leave. And mr. Farr, i visited both of those facilities and i heard the same message there. Thank you, mr. Chairman. Thank you. Mr. Pascrell just a note to members. So after your questioning well move to two to one ratio moving forward. Mr. Pascrell. Thank you, mr. Chairman. Good afternoon. I want to thank all the members of the panel. Each of you are ceos or senior Vice President s. I want you to think about something im going to say now. You know what youre effective tax rate is now and im sure youve done the numbers. If the ryan brady plan becomes the law, what will youre effective tax rate be . You see we have a problem. I listen to the chairman open up this meeting today, this hearing, and i listened very carefully as i usually do to the chairman. He mentioned three things in his introduction. He mentioned the Corporate Tax rate, ten years ago democrats on this committee pushed for a lowering of the Corporate Tax rate to 25 . Secondly, he mentioned the immediate expensing, write it off, thats the second thing that he mentioned. And the third thing he mentioned, mr. Chairman, is that businesses are eager for tax reform. The problem with what you said, mr. Chairman, is tox refoax refs not only pertain to the businesses of this country, tax reform refers to everybody who pays in some manner, shape, or form federal taxes in some form or other. We have a problem here. Because in the last 30 years weve moved and i want mr. Rat nor to respond to this, if he would, in terms of something he said before. Weve moved from an even tax system of taxing assets and taxing incomes. Thats not the case anymore. I believe its somewhere in the high 30s, 30 of taxing income and down into the 20 of taxing assets. And i want mr. Rat nor to tell all of us assembled here what that actually means in terms of what someone takes home in their pocket, whether they are poor or middle class, or on top of the mountain. Well, congressman, i think what youre referring to is the 1986 tax act made taxes on Investment Income and taxes on earned income the same at 28 and since then theyve diverge and 39 on earned and 23. 8 if you include the obamacare tax. Would you repeat those numbers, the final numbers, the last two numbers. I believe its 39. 6 is the top rate on earned income and 23. 8 on Investment Income. What do you think of that . I have a rather her receipt cal view of it and im actually a huge beneficiary of it because im in the Investment Business and so well all of you are. Well, some of them they may actually work and earn money, im an investor. And so i am a substantial beneficiary of the 23. 8 rate which, as you know, the proposal is now to eliminate the 3. 8 and make it 20. Thats right. I personally think it is a mistake. I have been in business investing for 35 years, ive had tax rates as weve talked about before at 28, ive had tax rates over 40, ive had tax rates at 15 on Investment Income at one point. None of it has affected by one iota how i conducted my life or my business. I see no reason why i should be paying 23. 8 on ny socalled unearned income whereas im paying 39. 6 on my earned income. I think i would actually support raising all of the taxes on unearned income as part of a way to pay for some of the things that weve been talking about today. Mr. Chairman, i hope you listened to what he just said. Because this tax reform thats put before us is phony and hip critical worse. It sends the wrong message to the poor, if im bold to use that term here, and the middle class at the same time. What were doing is saying to the American People were going to make your lives better, were going to increase your income and your salaries, youre going to be in a better position now, if we help the Business Community primarily. I want to help the Business Community, by the way, but i will not vote for tax reform that simply is directed and targeted at those who at the engine i want to take care of the people also that are in the back cars and maybe the caboose. And thats the problem we have in our tax system right now. Yes, we need a change, but its got to cover everybody. Period. I yield back. Thank you. Mr. Marksy, youre recognize the. Thank you, mr. Chairman. I appreciate the witnesses being here today, mr. Stevens, your company, at t has a huge facility in my district and we appreciate the fact that texas is the headquarters for at t. At the end of the day, its going to be the job of every member of this committee to go back to its constituency and say to it, this is this is a major tax reform plan, please support it and have me convince them that it is good thing for them. Lets take a situation where you, three or four companies, call your employees and call your vendors in to a big auditorium and you get up in front of them and say, this is why this the tax reform plan and the better way is a better thing for this company and its also a better thing for you as the employee or the vendor. And i would like to know how you would go about doing that. Mr. Stevens. Congressman, were here to support the comprehensive tox were for it because it will increase investigate mentd and increasing investment increases jobs and when you increase jobs, you increase wages. You give people what they care about is their net take home pay and it will go up because it will be demand, higher demand for their services. And the reason were for it is because as those working class individuals are fully employed and employed in greater numbers, the demand for our services will grow. And if our revenue lines grow and we have to pay additional income taxes on that, well be glad to do it. But its a cycle that helps everyone as well as their local school district, as well as their local police department, it also helps those with getting broad band and other services out because those additional investment dollars will go into that Infrastructure Investments, certainly for our company, so this is a benefit for all to make us more competitive with the rest of the world. Because we arent today. Thank you. Mr. Mono. I couldnt agree more with that. I was reminded that this room seals when the doors close to kind of in a bubble here and i think were talking n again about being in a bubble the. Rest of world has gotten competitive and has changed the way they do taxes. If we dont change the way we do taxes we are not competitive and thats what its about, getting the people in the back of the train back on board and bring the businesses back here so Small Business, Large Businesses can be profitable and do it here in america. So i hope we can do this and get globally competitive and look out of the bubble. I agree whun with the first two statements. We make investigate mechbts around the world. If we have a com peltive tax rate here in the United States it will increase the investment right here in the United States. Theyll come into the calculation of making those investments right here in the United States. I also agree you cant just do business taxes to our congressman over here you have to do individuals. Individuals have to see a benefit from this. You cant just make this for wealthy and for business people. You have to make this across the board. This is our chance, but if we have more money pr a lower tax rate as i company, we will invest more money because our job is to grow and investigate, not to collect cash but to grow and invest and thats what we could do. When i talked to our employees about the comprehensive tax reform that i know all of you are going to doing, im going to tell them that we just got a raise. Our company just got a raise. Instead of spending 560 million a year on taxes, were going to pay less and what are we going to do with that . With that raise were going to spend it and invest it. Its like being in a 100 yard dash and right now were starting 20 yards behind. Were running 120 yard dash against the rest of the world whos run a 100 yard dash and this going to put us back at the start line at 100 yard dash. I would agree with everything thats been said before so i wont repeat it but i would just say this one other piece which i think theres an enormous urgency around this the we all understand the political calendar this is the beginning of i new administration and theres a window in which things hopefully normally get done then were into midterms and reelection cycles and the pace tends to fall off if the we miss this opportunity and dont find Common Ground and you will of us are willing to make compromises we will all regret this later. And i agree with that and i would say to all the businesses that are listening to this, that are watching this very closely, we intend to did tax reform, it is our number one goal, and we are going to need your help at the end of the day to communicate with your employees that this is a good thing to do and they need to pick up the phone and call their congressman and say, please vote for this. Thank you. Thank you, dr. Davis. Youre recognized. Thank you very much, mr. Chairman and i too want to thank all of our witnesses. As ive licensed to a very intense and some would probably say onesided kind of conversation, not by intent, but you know, theres an old saying in illinois where i come from that says if you fool me once, shame on you, fool me twice, shame on me. Ive been listening to theories about trickle down economics ever since ive been able to read. And every since ive been able to hear. And ive never found a way yet where the trickle are trickled enough to really assure that the middle class was being protected in the same way that one would expect anybody from a different class or another class trying to protect that interest entity. I think the information that weve heard sounds great. But it also comes from not enough diversity, it just keeps coming back to what john said earlier. And i was wondering if there were other individuals being asked the same question what kind of answer would we get. Its kind of like asking the question is it fair for birds to eat worms. You ask the bird, you get one answer. You ask the worm, you get a different answer. Now youve got to determine which one is right. Which one is correct . Whose interest are being protected . Or is there a way to protect both. Is there a way to prevent there being losers and winners . Is there a way for the middle class to look at the proposals that weve seen and say, yes, this will give me the assurance that my status in life is going to be protected . And son mr. Rat nor, let me ask you. The tax cuts and we havent heard much about how to pay for them. And i believe that everything that you get you got to pay for one way or the other, but how do the middle and work classes benefit from basically the republican tax plans and proposals that weve heard about . Congressman, i think first as i said earlier in terms of direct benefit, its de minimis. Its for an american making 50,000 a family an average american it would be a 1,000 tax cut compared to a 25,000 tax cut for someone in the top 1 . So theres no real meaningful direct benefit. You would have to believe that all of the business cuts that have been discussed here would have secondary and tertiary effects that would benefit those people. And i would certainly agree there would be some benefit. I think this is very, very indirect and i think that before this committee should recommend such a package and make the contention that it helps the average american, i think a good bit more study would have to be done to actually document what were really talking about in terms of dollars because i think you would find that the cost of those tax cuts which, again, as weve discussed have yet to be paid forever relative to the benefits of the average worker may not line up properly. Thank you. Congressman, you and i are neighbors n illinois and im not sure if im the robin or the worm or maybe the dirt there underneath it all. But i would welcome you to come to my business anytime, weve hired quite a few folks youd out ever your district were weve put them through Training Programs and hopefully giving them that better life. I couldnt believe more in what youre talking about and i would love four come and ask those folks yourself anytime youre welcome, please. I look forward doing that and we are appreciative of every effort that is made to try and help even it Playing Field. Thank you very much and i yield back. Thank you. Ms. Black youre recognized. Thank you mr. Chairmannd a want to thank all the panelists for being here today this is a very interesting conversation. The way i break this down is there are four factors that actually drive growth. One is the labor supply, the other is the physical capital. The other is Human Capital and then fourth is innovation. So when we look at Economic Growth here in the United States, it really has been held back. Its been held back over the last several years and part of that is because of the size and the complexity of our tax code, thats one reason. Regulations, onerous regular laces that are put in place certainly do help or work a part of holding back that success. And for years we have seen a low Labor Force Participation rate. I know well read the newspaper and it will say unemployments down but we know that only about 62, 63 of those ablebodied workers that could be in the workplace are actually in the workplace. So weve seen low Participation Rate and that certainly isnt helping people at the lower or middle income to not have that. We see weak Capital Investment . Why is it that people arent investing so that we can see a growth in manufacturing and other industries and sectors . And essentially no wage growth. So these are pieces and parts that actually are affected by the tax code and would be affected as we make those changes. I do want to focus on as many of the others in here have, is the real reason for this, in my opinion, is that we need to unlock the opportunity and the prosperity for the American Workers. That should be the goal at the end of the day. And i know from my own experience im a smoel Business Owner that Human Capital is the most important part of my business enterprise, having good employees that we pay good wages to. Both to help our business succeed but also to make sure that our employees prosper. Thats very important in our mod he and i hear from that you all as well. And so weve got to look at ways to strengthen our people so that they have the skills and the training so they can compete and succeed in the Global Economy and ultimately to enjoy the benefits of their hard work. So mr. Farr, i want to turn to you. Your testimony speaks to the vital role of manufacturing and what it plays in our economy. I have a lot of manufacturing in my district and i say a men to that. What are the kinds of tax policies that create not just more manufacturing jobs, but better jobs and higher paying jobs . I think one of the key issues i talked about is the research and Development Tax benefit. Because thats thats going to be our lifeblood of the future. Manufacturings changing and were going to have to reeducate our workforce and were spending million of dollars right now because without them we wont have a manufacturing facility. But the research and development cuts are very important. American companies are very innovative and by having that ability to stay ahead of that foreign competition it allows to us compete even though we have the highest tax rate, some of the highest regulations an some of the other some of the weakening infrastructure we talk about. So innovation around r d tax credit would make a big difference for us. Willing to give up other things but that from my perspective is the lifeblood of what makes american manufacturers competitive. If you do better to your employees do better. Our employees do a lot better. Swhie that because you need good employ tease run your business and without them. We invest in education, employees, local education, put the money back in. All works togethering. Mr. Peterson on a similar note you described the increasingly Important Role of the service sector. Are there tax poll elizabeth sies that you have thought of that would again create not just more Service Industry jobs but also high quality jobs with better pay . We would definitely look at the Service Industry creating highpaying american jobs for all americans. And one of the ways that we look at this is related to territorial system specific live. The way intellectual property and capital is developed, it can move anywhere. Its not like a manufacturing plant. Manufacturing plants take a lot more of what you talked about, physical capital as well as financial cal tal to make a decision on. But its easy to move people and move intellectual property. Our tax laws today incentivize people to develop intellectual property probably in the United States but then move the ownership of of it offshore. The territorial system is one thats most important to get the benefit of that intellectual property, that ownership and the tax back in the United States. So what i hear you saying is that as we have in our business experience that the better we are able to do, the better were able to treat our employees, which that boat that advises is rising for both the employer and the employees. So this tax code is here so that we can make sure that they both get married together and that we see that the americans all the way across the board are doing better because our tax code has released those dollars and the energy to have the economy move ahead. So thank you so much, i yield back. Thank you mr. Mr. Keller our recognized. Thank you mr. Chairman and thank you all for being here. First of all i would not be here today if it werent for actions that took place in 2009 where one of the dealerships, one of our franchise actually under the cars art, and by the way mr. Rat nor youre not a car guy. Im a1 4 guy. Youre a hedge fund. To be a hedge fund is the guy that plants shrubs thats what i save money for at home. Dont take that the wrong way, i mean this sincere ryely because ive never done your job and youve never done mine but i know the reason. Im here today because one miefr fran iz choose was taken away by the United States government not because i did something wrong its that simple. All of you that come from the private world, when i look at whats going on and theres not one person because all were talking about today is there a need for pro growth tax reform and without a doubt everybody says, yes, there is. There is. Its an unquestionable. Then the next thing is whats fair . And how did we address fairness . And how do we ke fine fairness . And is it really the best for everybody . Ive got to tell you, ooif looked at this every which way we can from death taxes, were third again race i i operation right now i want to see it go to a fourth generation i dont know if we can and were a c corps wii also an s. Corp that went a decision we made on our own the government helped us make it. So he was look at all these things when it comes to pro growth it better be pro growth. I am just really concerned that the country is it is going to have record revenues cant come close, cant come close to to paying its spendings. You couldnt do it in your business and none of us could do it at all. So i worry about that and mr. Rat nor you are concerned about deficits, i am greatly concerned. I know that when president bush left office it was almost 10 trillion dds and what president obama left it was you will most 20 trillion so the concern with that is enmesh able. I dont know thousand grew that fast, but it did. Progrowth. In your estimation of where you sit and i know we complete globally now. We have to at the model we now exist in, all of these different items that were talking about today, is there any of them that you disagree with as far as growing, growing our economy . And make sure that all of you fol folks that pay every penny by the way of what this government uses to run these wonderful programs comes from you . Ive told the chairman many times theres been years ive not paid a penny in taxes its not because i didnt understood the tax code i didnt make any money. Its when the annual rate went from 16 million to 1. 5 million thats a hell of a hit. The world was upside down. So anything that you disa debris with what were doing or attempting to do because we all agree that if your health yt countrys healthy. Youre able to hire people, educate people, youre able to participate in your communities and more importantly youre able to fund every single government spend that we have out there, anything that you disagree with, anything you say we should be doing faster other than getting this to an end . The only thing id say youve got to do faster is we need to get our Global Competitive tax rates equal to our competitors around the world. Were losing jobs every day the more we sit here with this big difference. Had is a big issue. Ill tell right now i invest constantly around the world and these changes are big issues to us as a company. If we dont get this back in line were going to continue to lose jobs and fall further and further behind. This is very important to us in this country. Im an american, i manufacture america and i live in st. Louis, missouri. Perfect. Mr. Stevens. Or mr. It doesnt matter youre all doing the same thing. I kbleetly agree. That sur againstsy is important and lets not let perfect be the enemy of the good. We are willing to make tradeoffs. We understand that there are tradeoffs to be made that this is there are multiple interests that have to be accounted for, we all accept that. Please, with urgency, dont let the perfect be the enemy of the good. Thank you. One quick thing, you know, just how important it is to make this easy for Small Business. And you clearly get that. But, up know, we talked about deficits also. These other countries that are being very competitive theyre not worried about deficits theyre worried about getting the job, the industry and getting the stuff there. So its a tough problem. Im on this side, but it needs to be dealt with. Mr. Peterson. Im encouraged that weve bebegun this process and having this hearing and this is going to be hard but because its hard doesnt mean we shouldnt do it. Mr. Rat nor. Im a shrub and i dont know if slubds are allowed to talk or not. You know, you and i have been together before but i got to till i wish i could have sent you the letter i got taking away a family owned business because of somebodys whimds, okay. So i dont want to yet moo that right now although we are but i am going to say this, im reclaping my time thank you all for being here and in is the first step in you being here before. You are the revenue producers were the spenders youre the producers thank god were finalliet going the private sector in front of us right now to let everybody in the world now how we do improve our country. So thank you for being here. We can talk later mr. Rat nor. Thank you. Ms. Sanchez youre recognized. Thank you, mr. Chairman for holding our very first hearing in this congress to discuss what i consider to be the most pressing legislative issue, and thats our severely overdue tax reform effort. And i want to echo our Ranking Member statement that lasting comprehensive tax reform means absolutely nothing if it didnt put the middle class first. And i would really urge that this be a bipartisan effort. I continue to hope that we can work on a bipartisan package unlike the recent healthcare reform attempt because its very frustrating to sit and find areas of common belief. But not have your voice or your opinions herd. And while i its impossible to highlight everything that i think should be a priority for this committee as we continue on this path towards tax reform, im going to try to hit on a couple of key notions. First of all, i want to reiterate a point that ive made many, many times, tax reform needs to be comprehensive and not piece male. We cannot fix the code for one group of people leaving countless others worse off because of it. We also cant cut taxes for the richest of the rich and assume that somehow that will magically grow the economy. You cannot cut your weight of growth, thats been tried and its fail miserably. My biggest fear in this process has always been a final tax reform package that he puts American Workers and the domestic business that they employ that employ them on an unequal footing in our tax code. Our tax code is woe fully out of date, but how we get from here to a revamped tax code really deserves some thoughtful deliberation and we need to roll up our sleeves and get our hands into the nittygritty of what is good policy. The process also requires some thoughtful feedback from those who are going to be most affected by the changes that we will eventually make, which why i hope that we wont continue to have hearings where we only have panelists who represent a narrow set of interests. And i would love to ask the panel rhetorically how many of you are the sole or primary caregiver for an age are parent or a dependent child . How many of you are single heads of households . How many of you struggle at the end of the month with whether or not to pay your utility bill or go buy groceries for your children . I think that those perspectives deserve their time in the sun here to have their perspectives voiced as well. When we get one narrow swath of perspectives, i dont think that i does anything good for a thoughtful and robust discussion about how tax reform should move forward in a way that is fair. Ive often said that our tax code reflects our priorities as a country and we need to create an environment for goodpaying jobs to flourish and allow families to be able to save and have some financial security. You want to talk about uncertainty, many American Families face a great uncertainty from day to day which is very different from Business Planning uncertainty. Now during my time on this committee ive been proud to work on legislation in a bipartisan fashion to try to help ease the burden of child and elder care costs, and its my hope that the committee will consider those financial responsibilities and strains on families and the nuts and bolts of those proposals as we work to update our federal code. Beyond that, working families are only able to meet their needs at home when theyre able to earn a decent wage at work. And while this panel seems to focus on the competitiveness of our countries and im not taking that away, thats an important priority, i dont disagree that we shouldnt focus on how to make our companies competitive, but we also have to keep in mind how do we help working families be successful as well. And its not just about cutting the Corporate Tax rate. We need to look at what really, what policies really help those struggling working families. Questions that working families deal with, the ability to afford quality child care or to purchase a home or to save for retirement, those should be a focus of this committee right now. Right now we are forcing families to make impossible choices and i believe that by highlighting those tough issues we will force this committee to be a little bit more thoughtful in its approach to tax reform. With that, i have one question. Mr. Rat nor, i want to know if you could speak to how addressing the problems that middle class and working class americans face, how could that benefit the Economic Impact across the board . I think congressman, that would be a huge plus because, as ive said before, theres a supply side to the economy, which is what a lot of the investment issues weve been talking about focus on and theres a demand side. And to the extent that middle class people have more resources are more able to go out and buy things then thats obviously a big plustor Economic Growth. Thank you approximately ought times expired. Thank you mr. Chairman and i wont to thank all wirtz for being here as well. It wasnt that long ago that i probably could have been sitting on the other side with you as a businessman for almost 30 years. Mr. Rat nor i also have to say that the only reason im here is my profitable business, my car dealership, one of them was take own away from me during the cars are days and there were 53 employees in that business, it was profitable who were hard work, struggling americans like some of my colleagues want to talk become that i had to let go when the business was shut down. So we have to remember when government interferes, people get affected. And the tax code is affected. The one thing i want to talk to you about, i want to talk about another person that i represent. Its that 24yearold that starts out his First Business. He or she starts out and they dont have any money so they borrow some money, they writeoff the interest, they start hiring people p e. They dont take a paycheck and they hire those hardworking middle class americans and they start to grow and then they have to look at their business and they say, wait a minute, i cant hire anymore people because ive got this tax burden. So i slow down on my hiring and i gotta pay my tax burden to the federal government. So you cant grow and you cant give you cant bring more people on. Thats a business thats not representative of the panel, but the truth of it is, thats the hardworking american that needs to be talked about as well. And by the way, 34 years ago that was me. I started my First Business with nothing, i was a hardworking, middle class person barely making ends meet but i was able to live the American Dream and the tax code did get in the way. So the good thing about today is, i heard agreement from everyone, heres the things i heard agreement on. We need to lower taxes. We need a territorial system. We need to make surety u. S. Is more com tet. Hetive, and the cost there is a cost of doing nothing in the form of businesses and jobs leaving. That is so important. Now, the burden of the tax code, as im aware of, corporations dont pay taxes, you all know that. Corporations pass it on. So the more taxes you pay, youre passing it on to the individual. Its a consumer and we have to look at that because thats higher prices for the consumer. So heres what i really want to do. I want to get to the bottom of this. The real relief from the corporate rates going down will be to wage owners, consumers and shareholders. We do have the highest tax rate in the world and because we have the highest tax rate in the World Companies are leaving because theyre not competitive. We know that. Im hoping the American People are watching this because thats the truth and i think all of you would agree with this. We have the highest tax rate in the world. When companies leave, we lose tax revenue. We lose tax revenue. The United States government loses tax revenue. So we have to become more competitive. The way we become more competitive in a Global Economy is dropping our tax rates. Would you all agree with that . You all agree . Weve got to lower tax rates . Good. Because that has to be the driver. We have to lower tax rates. And the disparity really between the income between these tax rates its whats driving us. So tell me, would you all agree, because i want top end now, we can get into the weeds later, but in top end you all would agree swroe to lower our tax rates. Every one of you . You all would agree that we need to have a territorial system . You all would agree that the u. S. Has to become more competitive with the lower tax rate, agree . And you all agree that we cant do nothing. So i mean, we do have some agreement here. Bipartisan agreement. Which is great. Because if we can get this economy moving, its going to be so much better for the people, those hardworking American Families. So this is the concern i have and tell me what you think we should do immediately. I mean, immediately. And id like to hear an answer from every one of you. What should we do immediately . Because tax reform is difficult. Mr. Rat nor ill start with you. Unfortunately i think its a package. I think you need a comprehensive package that addresses all the various issues weve been talking about today. So i dont think going in now and cutting the Corporate Tax rate to 15 or 25 and saying, okay, weve done our job is anything remotely like a solution. I think you guys have a huge job on your hands with thousands of pieces so i dont think unfortunately you can do it today or tomorrow or the next day. I think you need to take some time and do it right. Well, my think would be weapon have to be bold and as you go through this process as we just heard it is complicated, theres thousands of pieces but lets be bold an lets get everything on the table and lets fix it. I agree. We need to be bold and bring all the constituents in, smaller people, the people in the factory, all the way up to the board rooms and we need to think about all the impacts of these individuals and what it means. But we need to reinvest in america, get the money back in america. Mr. Month he will. Lower it, simplify and it change the way you collect it. Mr. Stevens. Lower the rate, create a cycle of investment and do it right away. I do. And thank you all for being here. I appreciate every one of your testimony. Thank you. Thank you, gentleman yields back. Mr. Holden youre recognized. Thank you, mr. Chairman. Purchase peterson, in your testimony youve pointed out numerous times the competitive flaw in our current worldwide tax system versus territorial tax system. Had an extremely important point in an area that we obviously need to address in tax reform, everybody has agreed to that. I dont think ive take ann single meeting where someone has argued against addressing our International Tax code. Because while other countries have moved to a territorial tax system, were run of the last remaining countries to tax the worldwide profits of u. S. Head quartered companies, the other include greece, chile, mexico and south korea. Even more exclusive company were only one of two countries, air treea being the other to tax the worldwide income of u. S. Citizens that live and work in foreign justifirisdictions. Now we stand in even more exclusive because were the only kund r country, the only country that has through its tax code put both our companies and our citizens at a competitive disadvantage on the global stage. Thats pretty remarkable when you think of it. So mr. Peterson youre the ceo of a company with global operations, could you give me your firsthand perspective on how our tax code has affected the International Competitiveness of both u. S. Companies abroad as well as the ability for you to hire americans for jobs in overseas operations. Thank you. On the first point about some of the competitiveness, let me give you a couple of examples. In my texas i mentioned that we pay a tax rate of well over 30 and we have competitors pay in the teens. We have a competitor who is based in canada that plates globally one our largest competitors it pays a rate of about 12 . Theres another one our competitors that are did an inversion and moved their operation totz United Kingdom and went from a 30 tax rate to a 12 tax rate the in addition i mentioned earlier recent acquisition Business Companies moving all of their offshore cash into International Operations and doing acquisitions overseas. We are competing on a global scale, we pay the 30 rate, they pay a 12 and 15 rates. Had is something we feel every time we go out and have a situation were competing in the markets. Our employees when we move kp patriots around the world or we try to hire americans at other markets they have a tax advantage obviously. We pay our we pay our employees the same rates which means that for us its also an increase cost. We would like somebody to have the same net income and that means that were paying for also their tax assistance when theyre overseas. So there is an additional burden for to us have americans when we move them overseas. So with this example makes sense to you, i have a friend who works in mergers and acquisitions, they were buying a company in hong kong and they were looking at moving some u. S. Citizens to hong kong to work in executive positions there at this newly acquired company and my friend was tell me that it would cost 40 more to hire a u. S. Citizen to do the exact same job in hong kong. That would be the right increase, whether youre looking at people from the United Kingdom, australia, new zealand or singapore, hong kong, et cetera, theres always going to be about a 40 cost dlirch chal to hire american. I did this i got paid 125,000 a year it cost the company 500,000 a year to have me in hong kong. Thats the real cost of having international. Ive also found, ive been struck you go to a foreign country as a member of congress and always want to meet with the American Chamber of commerce there in the country, whether it be, you know, hong kong were talking about hong kong, and often we go there and we dont see americans there but well see british there or new zealanders there, australians there as executives in u. S. Companies based overseas. So i think had we address the territorial, the global the territorial system, we need to zras how our sit zends are treated as well. Particularly for their earned income and look at that as a residency based taxation and align our citizens along with our suspects as to hcompanies a yield back. Thank you. Ms. Sul youre recognized. Thank you mr. Chairman. I want to thank all of our guests today. Had a critically important first hearing. Im a new member of the house ways and Means Committee and i can tell you that the people i represent sent me to washington to try to be a part of the solution and not a part of the problem and im really excited that we are having a hearing today about tax reform. You know, i think its really important that the tax reform be comprehensive and truly be a tax reform. Im eye true believer that our tax code is in dire need of meaningful reform. I have no doubt that by working together in a bipartisan manner both parties have a once in a generation chance to really pass comprehensive tax reform that would benefit the middle class, Small Business and hardworking americans across this country. You know, my concern, though, is that the current administrations plan doesnt seem to be a product of collaborative work. I think its important and youve heard us echo this a couple of times and i know that our chairman is listening and i know that he too understands the value of colob bore ratetive work. We all want this tax reform to truly be lasting and not just a mere one off. Every day im honored to represent my home district of alabama, the seventh congressional zriktd. The Median Income into my district is 38,000. But i know whats possible with the little bit of resources and a whole bunch of opportunities from this district i get to live it every day. The challenge, of course, is to try to figure out how we can promote viability, great opportunities for both businesses and workers. I know that by sitting in a collaborative manner that we can achieve both. That theres that there can be winners winners and not just winners and losers. But i have to say that i was quite concerned that what were looking at in this current tax proposal is just more tax cuts and not true tax reform. I find it to be telling that weve been in this room for the last three hours almost talking about comprehensive tox reform and Vice President pence just tweeted 20 minutes ago i know that this president will sign into law the most consequential tax cut in american history. It cant just be another tax cut, gentlemen, it needs to truly be comprehensive tox reform. I know the foikz that i represent have been waiting for trickle down economics to tring trickle down to them and the spigot is always off by the time it gets to rural america. And think we have to figure out a way to make this work. So my question, i guess, my first question is to you plr rat nor. We talked about making sure that any tax reform suspect deficit neutral. Id like to talk a little bit about how we can make it distributionally neutral as well. You can talk a little bit more about sort of supplyside economics which you said like trickle down economics doesnt trickle down to the milled class into the working class. So you can talk a little bit about making sure any kind of comprehensive tax reform that we consider is also distributionally neutral . Sure. And thank you for your comments. I would say a couple things. First of all i agree that it needs to be comprehensive tax reform not just tax cuts regardless of what the distributional effects are. I would recognize that the president in his plan does propose to simplify the deductions on the personal side. We can ke bait what should or shouldnt be in there but i think certainly thats a step in the right direction and we should commend him for doing that. My problem is the distributional effects. I mentioned before that that 83 of this tax cut on the individual side goes to the top 20 of americans an average of 25,000 each. 50 , a full fist of this tax cut would go to the top 1 an average of 317,000 each. So that doesnt seem fair to me and its not com indicated to fix that its a question of what rate cuts do you give to what level of americans and its just making some adjustments to those formulas. I dont think its terribly com kated its something we need to do. Mr. Farr, im a Firm Believer that our tax code should incentivize the type of behavior we want to see if the for me i know the future of work in the rural parts of my direct is really quite scary and so incentivizing apprenticeship programs and Workforce Development and worse force training is really important. Each congress i try to introduce bills that reflect that. You can discuss the role tax reform can play in helping Companies Like emerson promote workforce