Midway. The untold story of the battle of midway. And timothy orr coauthorer of never call me a hero. A dive bomber pilot remembers the battle of midway. Watch the battle of midways 75th anniversary live on friday beginning at 9 30 a. M. Eastern on American History tv on cspan 3. The house way and Means Committee recently held a hearing to changes to the tax code that could expand the u. S. Economy and create jobs. Executives with Manufacturing Companies were at the hearing. Which was chaired by kevin brady. The committee will come to order. Good morning, and thank you all for joining us. And today our committees focused on a top priority for the American People. Pro growth tax reform that will create jobs, increase paychecks, and strengthen our nations economy. America has one of the most costly unfair and uncompetitive tax systems in the world. The need for pro growth tax reform is urgent. Todays high tax rates on american businesses drive good paying jobs overseas and makes difficult for our job creators and workers to succeed here at home. Americas burdensome International Tax system destroys u. S. Competitiveness and discourages investment in our local communities. Scores of loopholes, give favored treatment to Washington Special interests, while millions of hard working 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 and the senate to put forward our best ideas. Our committee is ready to answer that call. Over the past several years, weve held roughly 40 full committee and subcommittee hearings on all aspects of tax reform. All of our members no matter what side of the dais you sit on know tax reform is imperative. Now is the time to go bold and 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. So lets take a look at the numbers. Currently we have the highest Corporate Tax rate in the developed world, at 35 . For Small Businesses, its worse. The rates can be as high as 44. 6 . To unleash job creation, increase middle class paychecks, we know these rates have to come down. Washington must take less from american job creators so they can invest more in their businesses, their workers, and their futures. In addition to lowering rates we also know that bold policies such as full and immediate expensing are incredibly pro growth for jobs, paychecks and our economy as a whole. According to estimates from the nonpartisan Tax Foundation, this provision alone, allowing businesses of all sizes to immediately write off their velts, buildings, equipment, so software and technology will grow 5 over the next decade. And raise wages significantly. Finally, the numbers shows businesses of all sizes are eager for tax reform. Theyre ready for the opportunity to innovate, to grow and to hire new workers. Recently the business round table surveyed a group of more than 120 ceos about tax reforms. 82 said tax reform will prompt companies to increase Business Investment and three out of four said theyll increase hiring. These responses made clear that tax reform will create jobs, create paychecks, and growth our economy. Make no mistake, there are also consequences if we fail to act. 90 of the ceos said that delaying tax reform will harm the u. S. Economy. Causing slower growth, slower hiring and slower Capital Investments. And more than that delay would force all americans, continuing to live with the tax code that works against them, not for them, like constituents of mine who operate a plumbing franchise in montgomery, county texas. Roger who is a friend, and his wife who are deeply involved in the community said, as a Small Business owner im scared to death each year and how im going to have to pay into the government. That uncertainty is devastating, he says. Kind of 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. And todays hearing, well hear from more Business Leaders, real live Business Leaders about exactly what is needed to get jobs, paycheck and the economy moving again. Our witnesses are top level executives from American Companies of all size. From 80 workers 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 lend us your insight. Again, there is no perfect way to tax. But there are proven ways to grow our economy. With todays hearing, we will take a critical step toward putting these ideas into action for the American People. With that ill now recognize Ranking Member neal for his opening statements. Mr. Neal . Thank you, mr. Chairman for holding this important hearing and highlighting the need for tax reform. We all agree the tax code is broken. Far too complicated and certainly in need of repair. Our current tax system isnt working for families and businesses alike and we all agree that any revisions to the code should promote Economic Growth and create jobs for working families. However, we should reject idealogy and Work Together to reform our tax system for the 21st century. According to a recent pugh study, based on fact, not opinion, the share of adults living in middle income households in the United States fell from 62 to 59 from 1991 to 2010. Aggregate Household Income has shifted middle to the upper income households. The Research Found that 49 of u. S. Aggregate income went to the upper income households in 2014, up from 29 in 1970. And for middle income households 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 misthe point, greater concentrated wealth at the top is a reality as we proceed to this discussion. Income tagination is a real challenge and one that needs to be addressed in tax reform. This is in part why working families sent a strong signal to Congress Last november. They havent received a pay raise in years. Their bills are piling up, and theyre concerned about uncertain 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 daytoday costs, like housing costs, grocery bills, and childcare. It also means helping working families to buy their first home, send their children to college and healthcare for their elderly parents. And of course, it also means helping families save for retirement and that means protecting the tax incentives in the code for Retirement Savings. Our focus should be on making sure that when our American Families sit down around the dinner table they can look across at their spouse or 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. 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 committed to ensuring middle class tax reform is the true winner in any income tax. Americans know tax reform that provides middle class tax relief and askS Corporations and 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 who really need our help. All of us should oppose any tax reform that results in a greater burden on the middle class. The trump tax plan currently fails to meet this standard and i hope the administration will move back to the test set out by secretary mnuchin for tax return which he stated, quote, there will be no absolute tax cut for the upper class. Furthermo furthermore, tax reform should be done in responsible manner, scoring and supplyside economics are thrown around a lot these days. But make no mistake, tax cuts do not pay for themselves and anything to the contrary is a nonstarter. As we consider tax policy and economywide effects i would argue importance of considering macroeconomic effects of other policy changes including acknowledgement that robust investment in nations infrastructure would have Significant Growth effects throughout our economy. I also think we should think about using the revenue from deemed repatriation, acts to pay for infrastructure and other 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 on tax reform with 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 our witnesses as they join today and look forward to a continued and productive conversation. Thank you, mr. Neal. Todays Witness Panel includes five experts. John stephens is Senior Executive and ceo, chief alignment officer at atlas tool works incorporated. David farr, ceo. David emerson, president and ceo. Stephen rattner chairman of will advisers llc. The economy received your written statements and they will all be made part of the formal hearing record. Five minutes for your oral remarks. Mr. Stephens well begin with you. Welcome and thank you for being here. Thank you, chairman brady, Ranking Member neal, members of the committee. I appreciate the opportunity to be with you today. John stephens, chief Financial Officer of at t. I since early appreciate this opportunity to discuss Corporate Tax reform today. At t is a company with 140 year heritage, of research and innovation that includes eight nobel prizes and more than 15,000 patents and pending patents worldwide. We ploy more than 200,000 people here in the United States. Over the past five years weve invested more in the u. S. Economy than any other Public Company by adding 135 billion. One of the biggest issues facing this country is how to unleash Economic Growth which has underperformed for the last decade. We can and should do better. The key driver of u. S. Economic growth is private Sector Investment. When investment increases, so does economic activity, hiring, and wages. 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 mired in sluggish growth for nearly a decade. If were serious about robust growth, we must get serious about jumpstarting private Sector Investment. 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. We can respond to Foreign Companies that implement modern policies that aggressively compete for our jobs and our investment. We have a once in a Generation Opportunity to comprehensively update the code of the 2 1st century and put the u. S. Back on top. First we need to reduce the top Corporate Tax rate. This the quickest, most straightforward way to jumpstart investment in our country. It will bring our 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 for the full expensing of Capital Investments. This is an effective way to quickly stimulate the economy. The Tax Foundation estimates that this policy change would create the equivalent of 1 million fulltime jobs. 100 immediate expensing removes the negative effects of taxation on investment. We know it works. Appreciation, participation from bipartisan support from this committee provide acceleration that positively affected our Investment Decisions in those yea years. Plain and simple, we at at t invested more under this than we would have otherwise done. The ability to fully expense investment would do even more to inve incentivize at t and companies throughout the United States with more investment. More investment maens more jobs. We recognize 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. 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 countries appropriate time to just 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. So we will return during the questioning period for you. Again, thank you for being here. Youre next up. Thank you again for being a witness. Mr. Chairman and members of the committee. Im chief officer for atlas tool works, fourth generation family manufacturer in alliance, illinois. Im here representing not only my own company but 750 manufacturers who are members of the technology and manufacturing association, tma, in illinois. These manufacturers, many in congressman roskams district. Most like mine small to mediumsized supply companies that survived nafta, managed the tide through innovation, modernization and cost control we now produce more product than we did 20 years ago. Plus were poised to take advantage of the well earned opportunity for reshoring. We are successfully competing against the best the world has to offer and proud to manufacturer and help america. In order, to continue our success and grow while creating good paying 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. Lied like to highlight two things opportunity through tax reform and unique pain felt by small manufacturers due to complexity under the current code. Today the most difficult barrier to growth american manufacturers face is our selfinflicted tax code. Much of it written decades ago fails to account for todays internationally competitive environment. I understand many will argue for reducing the current rates. This might be helpful in the short run but i believe our economy and our citizens need and deserve permanent comprehensive reform that improves americas trade competitiveness. Thats why the manufacturers i represent are pleased border responsibility is at the center of trade efforts. All use border adjustable consumption taxes. That in the form of value added taxes, vat or good and services taxes, gst. These average 17 global and act as tariff and subsidy replacement. Most european nations have vat rates between 17 and 22 and every american exporter into the eu has to pay those rates to sell their products there. When mexico agreed to nafta, they abolished most of their tariffs but raised mexican vat to 15 , built a new tax wall for american products. India now in the process of adopting goods and services tax. Furthermore any country that wants to mimic currency devaluation can increase vat and use produce for other domestic taxes. In reality i believe tax policy and trade policy go hand in hand. I believe tax policy has far greater effect on trade than any trade agreement ever could. Good tax policy, one that encourages Domestic Trade and exports is, increase, good trade policy. Moreover its unilateral. We dont need to negotiate with anyone. We dont need to ask permission from International Body and dont have to risk a trade war. Remember, every one of our trade partners has some type of vat system. We simply need to change tax laws and immediately american producers regain their edge and working men and women can get a tax break. In smohort i want to get back ta world where we compete on price, quality and service. The second point i want to highlight today is the importance of simplifying tax code and reducing overall rate. My company like many small manufacturing businesses in america. Were off family owned. We usually own our own real estate and do not have a significant staff of tax experts. We work hard to be competitive, create jobs and pay our fair share. Consider Small Businesses provided some of the fastest employment and output growth 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 do not have resources to develop globally tax comprehensive avoidance plan. Thats why we must reduce overall rate, offer reduction in payroll taxes and fund these through vats. Its also important to simplify tax code and avoid disadvantaging Small Businesses, subchapter s and llcs. These types report taxes on owners tax reform. The calculations, they are excessively complicated. My own family business, which together employ about 80 people, have three different tax structures. One c corp. , two s corp. S and one llc to hold real estate. Like mine and tens of house of others throughout the United States, not looking for handout or advantage, what were hoping for is level paying field from tax code and earn prosperity, again, competing price, quality, service. All were asking for from congress is permanent tax code that drastically improves competitiveness through simplified tax system, places emphasis on border adjustment component. This reform will provide a level Playing Field so we can dramatically increase good paying american jobs and grow the American Economy at a rate we have not seen in decades. Thank you for the opportunity to provide this input. I look forward to your questions. Thank you, mr. Modl. Thank you very much. Good morning, mr. Brady and distinguished members of the committee. Thank you for allowing me to appear before you on this critical growthesh. Im ceo of emerson in st. Louis, missouri, and serve as current chairman as National Association of manufacturers, nem board of directors. Emerson is a 15 billion Manufacturing Company providing innovative products, solutions industrial, commercial, Residential Markets and we have over 80,000 people in operations in more than 150 countries. Nem, nations largest trade organization committed to policy agenda that helps manufacturers grow and create jobs. We appreciate current efforts of advance pro growth and current tax reform. Manufacturers in the United States struggle to compete and win. Our tax system with high tax rates and outdated International Tax rules in a significant Tax Compliance burden we have the best chance in 30 years to advance significant tax reform 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 is not. With a combined statutory tax rate that can top 39 , manufacturing in the United States face the highest Corporate Tax rate among oecd nations. This is a competitive problem. Top rates for manufacturers organized passthrough entities can be higher and this hurts this 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 marginal 37 , emerson pays real taxes in the United States. A key shared by elmmerson top t rate of 15 . We must also lower tax rate for pass through entities including 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 and cumbersome records for taxing income represents another major problem. Emersons business is global. 52 of our sales in 2016 were outside the United States. As a u. S. Company headquartered in st. Louis, missouri, emerson pays more in taxes on worldwide earnings than foreign competitors. This is another competitive issue. Most developed countries have territorial systems and their Global Companies pay little or no tax when they bring foreign earnings back home. The United States, earned, has a worldwide system meaning global u. S. Companies where they do business, they pay taxes as well as the United States when we bring their earnings back home. This added tax burden is a significant disadvantage when u. S. Companies are competing for global business. To improve u. S. Competitiveness, any tax reform plan should include territorial system similar to those in other countries with respect competitors are headquartered. This will increase u. S. Jobs, exports and strengthen u. S. Based suppliers and allow for a flow of capital back to the United States for investment right here in america. A tax reform plan must encourage longterm Capital Investment by allowing accelerated depreciation of newly invested assets. One of the most important being full expensing the first year. Expensing lowers after tax cost of capital, can drive increased investment in Economic Growth along with job growth. At the heart, as a head of a global Manufacturing Company headquartered in st. Louis, missouri, i strongly support a robust r d incentive. Continuous research and development is critical to ensuring United States remains a leader in Global Innovation and maintains americas competitive advantage and 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 that reduces Corporate Tax rate to 15 provides lower tax rates for passthrough entities, moves through a territorial system, maintains a strong r d incentive and includes faster Cost Recovery will ensure we achieve this goal and improve our countrys competitiveness and ability to grow. We operate in fiercely competitive Global Economy and we need a competitive tax system and need it now. Emerson committed to work with you to advance much needed tax reform as soon as possible. Mr. Chairman, committee members, thank you very much for having me here today and i look forward to q a. Thank you, mr. Farr. Mr. Pieterseterson youre recog thank you for inviting me to speak. Im happy to share how all companies can compete in the global marketplace. Im doug peterson, president and s p global. Analytics has been at the forefront of u. S. Economic growth since our founding 150 years ago as Small Business. Beginning with the expansion of the nations Railroad System to the rise of the worlds most liquid and resilient Capital Markets to the growth of Digital Information technology s p global has remained independent throughout u. S. History. Today i want to thank the committee for all 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 today is twofold. First we need to reform the u. S. Tax system, including lower Corporate Tax rate to level the Playing Field and putting in place a more Competitive International system. Second we need permanent comprehensive fix for investment, innovation and growth to support companies and American Workers. S p has grown. Weve kept most of our intellectual property in the u. S. , which means we pay a large majority of our taxeses in the u. S. Since it is u. S. Has highest Corporate Tax rate at 35 , we have a much higher effective tax rate than our international competitors. For example canada dropped its corporate rate from 36 to 26 and United Kingdom will have a rate of 17 by 2020. In fact, throughout s p globals history were consistently paid a Global Tax Rate over 30 . Many competitors pay in the low teens, this high rate affects our ability countries where lower tax rays lower their overall cost. With a less Competitive International system, u. S. Companies face an uphill battle. Currently when Foreign Companies established in a country with territorial tack system sells goods 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 home. In contrast u. S. Businesses that sell goods and services to foreign customers taxed fully in the u. S. 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 designed after world war ii when our economy was geared toward manufacturing and agriculture. The last rewrite in 1986 occurred before the internet and information economy which introduced new innovative business models. The emergence of technology, advanced manufacturing, modern agriculture, the growth of intellectual property and globalization of markets are all new features of our economy. The tax code has not evolved with the economy. The result is an unfair system that undermines competitiveness. Tax and equities that advantage foreign kpe tergs over foreign counterparts can be traced to this antiquated code. Its time for a change. United states has been birth place of Business Innovation we should use this for comprehensive, permanent tax reform to make sure its the engine of growth for Small Businesses, startups and other job the creators. Today were losing ground and we should be leading. I Hope Congress will seize the moment and enact substantial investment that will foster jobs, growth in the u. S. Thank you for the opportunity to provide this testimony and i look forward to having this discussing with you today. Thank you very much. Thank you, mr. Peterson. Mr. Rattner youre recognized again and welcome. Thank you, mr. Chairman and Ranking Member neal for having me today. I speak as an invest men manager analyzing companies, investing with companies as well as having spent time in the treasury in the early part of the Obama Administration. I would certainly concur with what every single 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 for rising fiscal gaps. Second, it should be fair and certainly not diminish the system. Third, growth and investment enhancing. Fourth, it should improve our International Competitive position. On that basis the proposal by the administration falls short in several important respects. While the president s is laud tore, far more detail how the administration would cut taxes than pay for reductions. Based on the information provided nonpartisan researchers estimated net cost could be 5 trillion to 6 trillion over the next decade. Without adequate off sets, these assets would drive up Interest Rates, deficit and federal debt. I would note that the deficit is already rising again. These projected deficits would be exacerbated by the trump plan. The economy for budget forecast debt to Gross Domestic Product already at historic rise of 80 would rise sharply and could reach 89 above every previous high except a short period after world war ii. Would drive this ratio to astounding 111 even as we continue to deal with the effects of an aging pochulation. To counter these concerns the Trump Administration appears to be resurrecting supply side theory that high deficits resulting from tax cuts dont matter because faster Economic Growth will close the gap. Thats not what happened following reagan tax cut of 1981 and fwi the end of the tenure twothirds of his tax reductions have been reversed. Nor is it our experience tax cuts pushed forward by george w. Bush in 2001 or 2003. To pay for the trump plan we would need average growth of 4. 5 a year. That has not happened on a sustained basis in modern history and is highly implausible in the future given our current aging and productivity trends. For its part nonpartisan expects 2 . Mnuchin thinks 3 is possible from the trump plan. I dont know an economist that thinks thats possible but it would still be 2 of revenue needed. Second on fairness. Given economic strains on middle and working class americans which we are all familiar, it is critical any tax reform plan focus on helping these americans. However, the details of trump plan unassailably contradicts there would be no tax consult for rich. Top rate earned income, alleviating 3. 7 and doing away with estate tax and alternative minimum tax. Some deductions eliminated most notably for state and local taxes. When the Trump Administration provides enough information for exports, rich will be big winner. Argued increase in the standard deduction qualifies mr. Trumps plan as middle class tax cut. The problem is a family of two or more pays less tax under current law than it would under trump plan than personal and standard exemptions which mr. Trump said he would leave. Large tax cuts viewed as enhancing shortterm growth the size of mr. Trumps tax cuts and lack of progressivity will quickly overwhelm the positive benefits. Most importantly Rising Interest Rates will squeeze out frift investment. Tax policy center estimated his plan would reduce gdp half a percent after a decade and 4 after two. For fourthly should enhance special competitive position. I would gray Corporate Tax reform without question. While stated 39 , many pay far less because of use of avoidance tech niece. As a result average rate is 10 to 15 points lower than the statutory rate. That is unfair to stakeholders. Abusive prices such as transfer pricing in return for lowering tax rate of 25 which is in line with oecds unweighted average. Id like during the question dauk about cash we talked about early but close by agreeing again comprehensive tax bill is long overdue but needs to be deficit neutral and fairer to the average american as well as reforming our Corporate Tax system. Thank you very much. Thank you, mr. Rattner. We will begin questions. Fixing tax code occurs once in a generation. Its important we do this right. The goals tax republicans developed for this once in a Generation Opportunity is first rather than the tax code designed merely to wring money from you, we already have that one, we want a tax code built for growth. Literally designed to grow jobs, paychecks and the economy. Moving america from dead last into the 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. So were going all in growing middle class jobs and paychecks. Lets begin with the 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, democrats and republicans together for bonus appreciation, Small Business expensing. Its all about rewarding businesses for investing buildings, equipment, software and technology we want to go bolder. House calls for shift onerous income tax to cash flow tax system. At the heart of that, we would provide for a full and immediate writeoff of all that new Business Investment. That investment, by the way, not only is the key to middle class and main street job growth, its a key to making our workers more productive. Thats what drives wages. Thats what drives america to the lead pack and having strongest economy on the planet. I want to start with our witnesses. Can you explain having full and immediate access of writeoff Business Investment will lead you to invest more in jobs both for you and for customers, for example, and businesses who are making them them sells. Mr. Stephens, well begin with you. Thank you, mr. Chairman. Just as it has with bonus depreciation for our company, we would invest more with immediate expensing. We would take the dollars saved and invest them in more capital. When we do that, invest in research, technology, productivity, for us that means building out more broadband. For us that means building out more fiber optics. Those provide jobs. Not only engineers who design and researchers who develop those systems but our proud employees who construct those and build those. They are going to have better jobs, higher wages and therefore the entire ecosystem will be better off. I will also tell you it will have a direct impact, state and county governments will get more governments because we do pay property taxes, sales taxes on all that investment. Yes, sir. So its a Virtuous Cycle of Economic Growth that comes out of additional business fixed investment. Does it also make customers, many are Small Businesses, buying this technology really upgrading your equipment, your computers, all your technology can be expensive. So being able to write that off immediately does that help Small Businesses be able to invest more in the types of technologies youre offering. Certainly. Many of our vendors in the supply chain are Small Businesses, diverse businesses. So they would be immediately help helped. It would help them generate business. From a perspective of what we consider large best, Small Businesses are some of our best, most wonderful customers. We want Small Business to succeed. Its good for the demand on our services. Absolutely. This is a complimentary situation, not one in different view views. We want Small Business to succeed in this environment. So that leads family owned business who both invests in your plant but customers buying your products as well. Mr. Motl, from your standpoint the ability to write off investments Going Forward both for you and your customers, whats that impact . Thats really important for us. Since 2015 weve invested 1. 5 million in new equipment and plant. Were doubling the size of our plant, putting in an edition. All that would really help us. Our sales are just under 10 million. From a perspective of incentivewise were investing in the future. We believe it. That would help douse that. Thank you mr. Motl. Mr. Farr, manufacturing. If you want to stay competitive you have to reinvest all the time in the business. Its expensive. Customers are reinvesting, they are buying those products. So how for the first time in history all businesses of all sizes immediately being able to write off from their taxes, what impact does that have . A Significant Impact on returns. Obviously drives a higher level return from the standpoint of cash flow, gets our cash back to us, gives us more money to invest down the road. We have invested in the last five years over 3 billion in capital. Capital drives growth, productivity, jobs. Having a return on that, obviously at a higher level and the cash coming back into the corporation gives us more money to invest in capital, people, and growth. That will drive a faster Economic Growth overall. Thank you, mr. Farr. That illustrates power of simple cash flow system that focuses on that. Mr. Peterson, your insight looking at a broader range of the economy but the technologies and services you sell. Whats the impact of immediately writing that down and capture that and making new investments. Whats important for us, it would allow us to keep jobs in the u. S. Today theres a competitive environment because other countries around the world have such low tax rates. In fact, theres countries calling on us. We receive Relationship Management from other countries, singapore, ireland, where they come visit taos ask us to move those jobs to their country. They are highpaying that would require economists, mathematicians, people designing new intellectual property. They want that overseas. These types of tax changes will allow taos develop our products and services in the u. S. , will invest in the u. S. In the last two and a half years weve invested in large operations in charlottesvil charlottesville, texas, colorado, and new york. This would ensure we would continue to do those investments in the United States. Thank you, mr. Peterson. Mr. Rattner, thank you for bringing your criteria forward. From your point you work and see any clients whether they are in manufacturing, technology, small or large business, investment growth. Growth that comes. Your view on immediate all size Business Investment in those productive investments, what impact do you see from this provision . Thank you, mr. Chairman. First, i would 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, for example, immediate writeoff of all of their Capital Expenditures they would invest more. Thats fairly obvious. If you give somebody money to do something, they are likely to do more of it. I think that the focus on this provision is excessively narrow in terms of what is affecting investment in this country. When i spend time talking to ceos and companies, sure, if you lower their taxes they might invest more. They are faced with demand in this country is quite weak, personal income is quite weak because wages havent gone up. They are investing more money in other parts of the world where they see faster growth and more demand. So i think the question of investment in this country has to be viewed holistically in the context of how do we get growth here. This may be one piece but it is not the holy grail. Its not going to single handedly solve investment challenges in this country. Mr. Rattner, i agree. We have to take tax reform in a comprehensive way and put together a number of pro growth provisions. But investment part of this is key to middle class growth. The estimates of the house blueprint are that it will raise average after tax wages family of four by 5,000. Again helping create the demand that helps grow our economies. So thank you all for those responses. Mr. Neal, you are recognized. Thank you mr. Chairman. Mr. Rattner, let me take a moment to thank you for your leadership and recognize the success of automobile restructuring that took place during the midst of the recession. I remember having extensive conversations with individuals like mr. Levin at the time. Our greatest fear was if that industry entirely collapsed r d would be moved offshore permanently and trying to get it back would have been near impossible. So i think we begin by changing you for what you were able to do to turn around that industry and to thank you for your kpochserv. As i noted in my opening statement, mr. Rattner, my priority for tax reform is the middle class. Middle class has contracted in the United States over the past two decades while those at the top have done better than ever before. That is not a statement from a democratic manifesto, it is from the Pew Foundation and many think tanks of a cross the country. Working families did send a strong signal last november, frustrated by stagnant wages, tired of a tax code that favors big over medium in the country and greater concentration of wealth at the top. They are anxious about a very uncertain financial future. The true winners of tax reform must be middle class americans and their families. In your testimony, mr. Rattner, you agreed with the position that was offered that its critical that any tax reform plan be focused on nilgts income families. Provides us with suggestion you have and touch upon the need for greater Retirement Savings incentives in our code for the very families ive just described. So addressing income stagnation and Retirement Savings and rising income inequality is a big problem in america. Based on your experience, mr. Rattner, 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 in the first part of this about investment. Youve now talked about the situation with the average american. I dont believe in response to chairman bradys comment that while there certainly would be indirect effects on average americans of investment tax benefits, i dont believe thats the most direct way to help them. I think it is frankly kind of a form of trickle down. I think when you look at the tax proposal thats been made by the administration youll see its very unpallbalanced. It has not yet been scored. President Trumps Campaign proposal was scored, 80 of his tax reform would go to the top 20 of the tax cut. Middle class would have gotten 1,000 tax cut. Thats not my view of what a fair and balanced plan would look like. I think part of the equation is to give middle class americans more of a tax cut so they can go out and spend and help get our growth rate up to a higher level. With respect to the question of Retirement Savings, thats a whole other subject but we have a huge problem of Retirement Savings in this country. 401 k s and i. R. A. S created some benefits but a vast amount of undersaving by americans who are facing a really tough time in retirement and i think we need to think about fairly comprehensive restructuring of that program. Thank you. Thank you, mr. Neal. Mr. Nunes, youre recognized. Thank you, mr. Chairman. I think its safe to say some have expressed support for moving to a cash flow system. One of the opportunities we have during hearings like this, this being one of the first hearings well have, multiple over the next few months is having folks like your self be able to speak before the American People here in congress but begin to talk about these switching from an accrual system to cash flow system with full expensing and all of the benefits that that will do for the American People in terms of not only growth in the economy but also wage growth. Why dont we just start with you, mr. Stephens. Having a big company, one of the Largest Companies in the United States, the opportunity to go from a complicated accrual 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 simplification that might be required to provide some balance to comprehensive tax reform would be very helpful. Youre right, we file over 250,000 tax filings a year here in the United States. 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 provisions of the lower rate and incentive to invest in capital would be the most effective way for us to increase our investment, and through that hire more people, generate more jobs through our supply chain, generate more research with technology development. Quite frankly improve the wages of our employees and quite frankly of their peers who work for other companies. As that goes through the system, it would generate demand for our services. Thats the real answer for Economic Growth as Peer Companies represented today from all sizes invest, 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 then for us it would generate the top line. There would be sicmplification. Were a large company, we have resources. Simplification is more beneficial to small or mediumsized businesses. They are very important to our company because they make up some of our best customers. I think thats a great transition, because sitting next to you is a Small Businessman from illinois, mr. Mottl, welcome. I have a business that has a lot of Small Businesses. I think having you here today sitting next to one of the Largest Companies in the United States really shows how we can get big businesses in america and Small Businesses in america to agree that moving to a cash flow system like this would be very beneficial. So could you walk us through just kind of the opportunities that moving to this system would give a Small Business like yours, mr. Mottl . Absolutely. Thank you. You pointed to the relationship here. Id like to point out at t and Telecom Industry was one of the biggest customers of my company for almost 100 years. We built a lot of components of the phone network. This supply relationship were talking about is so important. 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. I think in relation to the tax that were talking about, the cash flow tax, ive seen some models that maybe have a little concern for Small Businesses but i would ask you to consider maybe thinking about border adjustable profit tax as you move through that. Its very similar to what youre talking about but focus more on tax flow. Either is an improvement. Anything that simplifies and gets my customers happy and doing business with me, its a great tax reform for me. Thank you. Ive got a few seconds left, mr. Farr. I have to agree. Healthy Small Businesses are important. They are a key supplier. If i can redirect money doing tax reforms to engineering and new products and innovation, that will obviously kb lly kprl economy, help making america competitive. Allowing assets into the productive part of the economy. Not saying tax lawyers arent productive but id rather we know that, mr. Farr. We would never say that. Mr. Levin, youre recognized. Thank you. And welcome to all of you lawyers and nonlawyers. You know, i think theres general agreement we need to look at the Corporate Tax structure and the Obama Administration did so. 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 from this chicago entity. And i quote, i find the stimulative effects of income tax cuts are driven by bottom 90 . Empirical link between employment growth and tax changes for the top 10 is weak to negligible and even a Business Cycle frequency. Chen ill continue reading f policymakers aim for short to medium run, this paper strongly suggests tax cuts for top income earners, less effective for tax cuts for low income earners, overall the results not only suggest some scepticism for trickle down economics, but they also provide evidence with supply side tax policies to do more to consider the relative efficacy of tax cuts targeted lower in the income distribution. So i just want to mention that when we talk about comprehensiveness, less keep in mind who 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. Stephens. One of your statements. Our current tax system also harms workers. They bear 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 stagnated. And i think theres much doubt, if i might say so, about that reference. Let me just say a word about bonus depreciation. We tackled that a couple years ago. And crs made clear that the efficacy of bonus depreciation depended on its being temporary. Thats why it was enacted in the first place, as a boost during a recession. And so when you essentially adopt in a nonrecession period, the 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 out there as if they are some kind of a magic wand. Crs essentially says it is not. Indeed dave camp left depreciation out of his proposal all together. I want to ask each of you quickly. 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 . Are you among those who say let is flow. If the deficit increases, it will exceptionally 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 levin, i could start. Certainly we are as a member of the group of companies that operate here in the United States in part of our this is our home. Absolutely. Thats why in our comments we talked about tradeoffs. Comprehensive reform, there will be tradeoffs. We understand that. That is something were going to have to work through so we come out with complete and workable package. Mr. Mottl, are you concerned . Yes, representative. But i want to you have your cake and eat it, too. Ive given you the opportunity with the goods and services tax to pay for the Corporate Tax cut and give working americans an immediate boost to their paycheck. Congressman levin, i would say, yes, im concerned about a deficit as individual taxpayer and ceo and i look for tradeoffs back and forth to make sure we do this right for the economy on a balanced basis. I think its very important. Thank you. All time has expired, mr. Levin. I would point out House Republican blueprint as designed balances within the budget counting on Economic Growth properly measured. You are recognized. Thank you, mr. Chairman. I want to echo your comments about full expensing and how important it is. Thats why ive been an advocate of making 179 expensing permit, bonus depreciation. Im not going to take the bait and ask someone to respond about bonus depreciation because i think that was covered as well. Business investment as all of you know declined last year. The First Time Since the recovery began. Not a good sign. Before i asked my question, i want to thank you all for sharing your experience. One of the things mr. Stephens and mr. Farrs testimony that struck me as so important in the underlying debate letting the perfect be the enemy of the good is the cost of delay. We can pick apart any piece of this, but the cost of delay is so important. How do we put a cost to that delay, 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 can, in terms of jobs, in terms of Economic Growth, in terms of investment. What is the cost of delaying . Weve been talking about tax reform here on this panel for years now, and yet we continue to let the perfect be the enemy of the good. Mr. Stephens, whats the cost of delaying this again . Lost wages for working class today. Its underemployment. It is Participation Rates in the workforce that are at historically low levels. Middle class workers are probably the bulk of your employees. By far the bulk. We are the largest we believe were the Largest Union employer in the country. We have over 120,000 representative workers. Were proud of them. They do great work for us. They would be the largest beneficiaries of the additional Capital Investment because they are the ones who do much of that work. So your headline is the cost of delay impacts the middle classworker. Absolutely. Thank you. Mr. Mottl. The delay cannot happen. We saw what happened with the markets yesterday because they are concerned people were not going to get things done here. So ive invested all that money in my business and im expecting to get a return on it and be able to pay back the investors, my family and the bank. So i need my customers to be healthy. I need tax reform right now. My employees need it now. They want to start saving and getting ready for the future. Thank you for your investment in ohio, by the way. Were moving ahead because im assuming well get true tax reform done with 100 Million Investment there right now. Cost means lack of innovation, less new products, less jobs. Its that simple. We look how much growth is going to be and pair it back based on delay. Every time dade we push that investment out. It does have a real impact on people, how we hire, investment, new products. I believe we will get tax reform and thats why were moving forward in ohio, wisconsin, an down in texas and missouri right now. I think this body understands the importance of getting real tax reform for the first time in 30 years. Were betting on you were going to get it done. Mr. Peterson. The cost of delay is also the cost of investment. If the delay is to not get a lower rate and not get into a territorial system, were going to see more Companies Looking for some sort of inversion, not bringing their cash flow back from offshore. Just recently one of the companies in our industry did a 3. 3 billion offshore investment with their offshore cash. We have no chance of getting any of that cash back to the United States. Great point. Mr. Rattner, dont ruin the picnic now. Im sorry. I didnt hear . Dont ruin our picnic. Im not going to ruin your picnic, congressman. Thank you. We can all agree on that, on your question. I dont think theres a lot of disagreement probably on what we should do, but i dont think any reasonable person could disagree sitting where were sitting now having nothing for 30 years in terms of comprehensive tax reforms has cost of millions of jobs and tax reforms and so on. Every day when i pick up the paper and read about a Company Moving itself or jobs overseas, it really upsets me because i think we could be doing something lout that right now. Thank you, sir. Mr. Chairman, i agree and yield back. With that agreement we should probably stop the meeting, just so you know. Youre recognized, mr. Lewis. Thank you very much, mr. Chairman. Mr. Rattner, i want to join representative neal for thanking you for your service, your service to our country. Mr. Rattner, im very concerned about 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 it right. As we consider tax reform, do you think it is important to consider the impact on working families and future generation and reform, tax, as we consider reforming the tax. Yes, i do think its important. As i said, i think its just as important as getting comprehensive tax reform, removing the loopholes and avoidance techniques both for individuals and for companies as well as getting the Corporate Tax system fixed. I think it needs to be fair, and i think it needs to have a positive impact for the average american. I think to have a 5. 5 trillion tax bill that involves a 1,000 tax cut for an average american making 50,000 a year doesnt seem fair to me. I think there needs to be fairness. As i said earlier, i think the comments on Business Investment, which i understand why they are being made affect the supply side principal of more factories, thats all good. But we need to do things on the demand side, putting people in a position for higher wages so they can spend more and get the economy growing faster. While i do share the view we need comprehensive tax reform im troubled by the propose as on the table both from the administration and house blue print the chairman referred to in terms of the balance of fairness and also stimulating every part of our economy not just investment side of our economy. 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 . Representative lewis, from at t, we take great pride in the diversity of our Employee Base, our customer base. Recognized by many, many, in many, Many Industries for our accomplishments. We have a longstanding supplier diversity program. We spend close to i know, sir. I appreciate that. But i dont see any africanamerican, asianamerican had, native american. I dont see any women here speaking up or speaking out. Of what they need, what they want. Our country is a very diversity country. Our forefathers and our foremothers 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. I yield back. Thank you, mr. Lewis. I think we agree on that point, and anrecognize that our democrat colleagues on the committee have the an opportunity to bring witnesses to this table, as well. I think its important for us yes, and made that choice. And i think its important if i may not at this time. Mr. Chairman, would you yield . Yes, i will. Mr. Chairman, the breakdown of the witnesses which is a pretty good discussion i think we would all agree that its helpful. The break down of witnesses of 41 is not representative or reflective of proportions on the committee from the two the political parties. It is traditional to take this type ralph approach. I think its important as we talk about middle class workers as we invite witnesses here, we recognize they represent a Diversity Group of americans that mr. Lewis has championed beautifully for over the years. May i yield . Not at this time. Mr. Reichert, 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 of the panel. That would allow job growth, create jobs, increase paychecks, grow our economy. And help hardworking americans. We all agree that tax code is broken. Its too complicated. So i want to touch on the question na mrquestion that mr. Berry highlighted and tie it back to mr. Lewis point if i could. Mr. Peterson, you talk about the impact of our outdated code on your business. 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 hardworking americans that mr. Lewis has referred to and others prior to my questioning. How is it going to impact your employees . Its been mentioned a little bit, but if you could dive into that question for me. Thank you, congressman. As i described before, let me give a little bit more detail. We have been a company around for 150 years. Weve developed our products and services which create intellectual property. We dont produce tangible goods. We produce goods and services. Our intellectual property is registered and owned in the United States principally in new york. When we export our services, we pay full taxes on those goods and services in the United States and in the new york state. Our competitors are have intellectual property and capital registered offshore and they pay very low taxes, when they sell those products and services into the u. S. , they do not pay those same taxes on their products and services. Second point, new companies that are being developed today in the last 15 or 20 years, they begin their development of their company from scratch with a tax policy. And they register their intellectual property offshore immediately, they set up the employees offshore, they put a Service Center in dublin or in luxembourg or in singapore. They own their intellectual property offshore and then they sell it back to the United States so they dont pay taxes on it because roimts go back to an offshore business. We compete against Companies Like that. For americans today that are watching, how is this going to help them. If we reform the territorial taxes at a lower rate, we will invest more in the United States. What does that mean for the American Worker investing in the United States. We will create more jobs. Creating more jobs. Higher paid jobs . Theyre all kinds of jobs. We have jobs all the way from lower end jobs. We need people at all Different Levels. These are not jobs just for white male americans. These are people from all over the country. Every american citizen, every american who is working in this country will benefit from this tax code. Is that correct . Every mern. Nodding your heads . Its going to be good for all hardworking americans, correct. This is good for allamericans. Every time we start a new operation, we have to build facilities. We have to get organized in that regional section. We hire all types of workers. Its a great benefit for the entire spectrum of u. S. Workers. Great. All of you agree . Mr. Farr, id like to follow up on your comments about the importance of tax reform to, as it relates to u. S. Competitiveness and Economic Growth. In your view and i know weve had you know, lower corporate rates, permanent territorial simplify full expensive, comprehensive. What is, in your opinion, the best thing that we can do, 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. I know theres going to be a lot of tradeoffs, pluses and minuses relative to that lower tax rate. Its very, very important to have the lowest tax rate. That will help all employees. The last ten years, weve increased our wages year by year but my Employee Base has lost a lot from higher taxes and lower cost of benefits. Lower tax rate will help. 20 seconds, the importance of permits. Permits is critical. I make decisions over three years, five years and ten years. Its a tenyear horizon. You need certainty to help workers keep their jobs, right. That makes a big difference. Thats why im betting on investments in ohio right now because im certain youre going to do it. Thank you. Youre recognized. Thank you, mr. Chairman and our witnesses. This is a very troubling time in American History. Our National Security has been jeopardized. Our democracy is threatened while so many have remained silent about it. Hopefully, the appointment of a special counsel is a first step to seeking justice and to assuring americans that our system of checks and balances is not entirely broken. The subject of todays hearing is directly related to the willingness of so many to ignore a growing tower of trump travesties. Some see trump 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 ach entire year that anyone has come forward in a public hearing if anywhere to justify this selfstyled better way tax plan. Now, i certainly favor Public Policies including tax policies that are 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 workforce where theyre growing workforce shortages in education and job training for jobs that are going unfilled, we can become more competitive. Those are the very programs that President Trump proposes to slash. We know that if we have a competitive infrastructure instead of trucks backed up on our highways and trains on outdated 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 are ones that hes never gone the around to making a proposal on. And, of course, 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 outdated. Its full you have loopholes. It doesnt work very well. But the witnesses that are before us today are from companies that seem to have done pretty well under that system. And they tell us today that have if they pay less or no taxes every time they invest a dollar at home, theyll begin investing more at home. Well, 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 is to show us the proof that this particular better way tax plan will actually grow jobs. And that proof has to come from some people who come before this committee who the 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 testified to here today, we do need a tax rate for corporations that is lower than it is today. Of course, if we lower the tax rate into the 20 percentile, that will be much more than many corporations are actually paying today. We need comprehensive tax reform that involves tradeoffs. The tax code is replete with tax loopholes, but we dont have really a list of tax loopholes that would be closed today, only vague talk of tradeoffs. And certainly we dont just need tax cuts. We need comprehensive reform. This is not the first tax cut that this committee has considered. Weve already approved in the house almost trillion dollar tax cut that will provide most of its benefits to the super rich and a few corporate interests like the pharmaceutical industry. Before his confirmation it, treasure secretary mnuchin promised there would be no absolute tax cut for the upper class but the one page, i guess its shorter than a grocery list that has been presented more recently by mr. Nuch chin is chalk full of candy for those in the top. One analysis suggests that the top 400 taxpayers will get 15 million each. We need to be working on a comprehensive tax reform that were 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. I yield. All time has expired. Mr. Rosskam, youre recognized. My friend from texas just argued essentially we needed a lower tax rate and criticizes the people coming and advocating for a lower tax rate. But i digress. Theres an old phrase that says this, when the bulls fight, the grass loses. So who loses as we dither under the current tax code . The wealthy are not suffering today. Wealthy are doing well. Its the folks who are at the lower end of the economic spectrum who suffer if we wring our hands and lose a once in a Generation Opportunity by pursuing a perfect tax code, which is a complete illusion. Perfect tax code is the unicorn of 2017. What we want is a good tax code. What we want is atach code that mr. Lewis can celebrate when he says lets get it right. Okay. Lets get it right. So one of the things that we need to discuss and really litigate publicly understand what it means to get it right, two of you, mr. Modal and mr. Farr mentioned in your testimony and im interested in exploring this, what is the value of permanence . Whats the value of permanence . So we often talk in terms of renting things versus buying things. We put a premium on owning something. And it would seem to me that theres a real premium on permanence. All of you have been, you know, been exposed in terms of marketplaces and so forth. So mr. Stephens, lets start with you. A permanent tax policy versus a temporary tax policy and put this in the context of all the anxiety that we feel and the debate around this place where we have these tax extenders and temporary policy that fade off in 24 or 36, 48, pick it number of months. What is the value to you and then further on down the line because you told mr. Reichert what happens down completely throughout the whole chain, how important is permanence . You got a minute on it. Permanence is extremely important. The sbalt to look at as mrs. Farr said not a quarter or a year but three and five and tenyear plans, particularly in the investments that a company like yours make that are in Infrastructure Investments that provide benefits literally over decades. Having that ability of permanence, knowing what the rules are, tell us what the rules are and we will abide them but knowing that allows us to make consistent significant, material Capital Investments that allow for the demand for jobs, demand on our suppliers, and quite frankly, with the demand on those jobs, as you put more demand for more labor, wages go up. Its simple supply and demand. Its a consistent, its a cycle that continues to repeat itself as they come back and buy more mobile services and buy more thanks. So it is very important to have consistency and permanence with regard to the rules. Mr. Mottl. Well, you know, i cant speak enough about permanence. Businesses vote with their feet. Right . You have to answer to your constituents. Most of them have a job but a business. The business doesnt vote. It just leaves and takes jobs. You talk about the success of businesses. Ive been fighting for my life my business for the past decade as my customers keep leaving this country. I get one industry figured out and they leave and ive got to find another and another. Its been a tough battle for the last decade or longer. I think a permanent tax code is so important to get my customers back in this country buying products from businesses like mine. Mr. Farr, what would it mean for you and emerson electricing iffing this congress were to give atach code that you could rely on beyond a decade . So. It means a lot to us because we make investments. You the new facility we put in ohio is replacing a facility built in the 60s. Were making a facility investment to last for 20, 30 years. I have a choice, who offers the best incentives and gives the most consistent tax rates. From that perspective, i look at this world. If you do a shortterm onetime accelerated depreciation impact you have a surge one year of capital and it dies. That is not a longterm strategy relative to investing. I need to think about two, three, four years. Im thinking about Capital Investments rights now threeyears out and where im going to put that money, where am i going to build that next facility for 100 million, 200 million. I need permanent tax rate for at least ten years. Mr. Peterson, just quickly. Permanence creates certainty. Certainty reduces risk. Mr. Ratner even quicker . I agree. Amen to that. I yield back. And you got in under the wire well done. Mr. Thompson, youre recognized. Thank, mr. Chairman. Thanks to the witnesses for being here. Im glad that were looking at doing comprehensive tax reform. I think its extremely important. And this morning, i was just making some 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 of the witnesses recognize the importance of that. I think we need to pay for it in real terms, not just with there needs to be tradeoffs. We need to specifically pay for this. We cant add to our national debt. And i think its important that its bipartisan. Big things that happen in congress arent good unless theyre bipartisan and weve all experienced what happens when we try and do it some other way. And we need to make sure as a lot of my colleagues have already mentioned that we really hone in on focus in on the middle class. That is extremely important. And then i added one bullet to my notes when i hearded you, mr. Mottl, speak and you mentioned that the desire to lower the payroll tax. I wrote down that it shouldnt hurt the middle class. And i think we need to remember that the payroll tax is how we finance Social Security. And unless youve got some way or committee has some way to insure that Social Security stays strong, if we do, if we do tax reform that takes away the funding for Social Security, that hurts all of our constituents and i would hope that 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 that was done by the university of minnesota, the university of chicago, princeton, the federal government. And they found that a 27yearold man today is making 31 less than he would have made in 1969. And they go on to say that hes unlikely to make up 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 jibe. Especially if you juxtapose that with some of the numbers that 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 themselves or that arent paid for dont generate this panacea that some think that it does. We know from the 80s, we know from the early towels, and we know whats happening right now in kansas that tax cuts dont automatically pay for themselves and we have to recognize that. Mr. Ratner, 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 that 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 Interest Rates rise as the federal government borrows more and more, all of that is absolutely a drag on Economic Growth in this country. It seems like the whole panel agrees that whatever this committee does on taxes needs to take account of its impact on the deficit. Thats where honestly i have a little bit of a problem of what ive been hearing because i hear wed like to do this, this, and this but i havent heard how were going to pay for all that. The second thing if i could make one other comment that i was struck by congressman doingettes comment. Were looking at this in a little bit of isolation. If you cut depreciation, there will be more investment. How much we dont know. Will it be enough to pay for it or will it justify it . We dont know. We also need to think about this compared to other ways we could in effect spend this money. Would the money be better spent on infrastructure, better spent on job training, better spent on education . Because the amount of money the federal government has for any of these things is limited. We need to make sure its spent effectively and look at it across the entire continuum. Mr. Ratter, can you just further explain 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 . Well, first of all, its a matter of immediate fairness that youll be giving a benefit to the upper class and to business and very little as i said earlier to the middle class. Secondly, we do as i said in my testimony have a problem of rising debt and the middle class will simply have to end up bearing a greater burden of paying for that somewhere down the road in the form of higher taxes if we dont keep our debt under control at this point. But cost them money. Eventually cost them money. All time has expired, mr. Buchanan, youre recognized. Thank you. I want to thank all of our witnesses all of us have a diversity background. I was in business. Built two pretty goodsized companies. We need to be more competitive on the corporate rate. But i wanted to touch on passthrough entis and make sure they dont get lost in the mix. Ive got a bill id like to see close to parity. When you look at corporate rates at 35, theyre not competitive, but on pass throughs its high as 44. States like california, another 12, 13 , it could be 57 . It makes absolutely no sense. So i guess id like to ask some of the panelists just your thoughts on lowering those rates where theyre more competitive, getting it down to somewhat near the corporate rate. I dont necessarily agree with 15 but the difference that would make in terms of growth and jobs and in terms of raising wages. So ill start with the gentleman, mr. Mottl. Well, yeah, absolutely. The passthrough issue is big. I think right now a lot of them are paying around 44 and so you know, if we go to 20, 25, you know, i think its important that it gets lower and closer to the corporate rate that theyre more similar and not so dissimilar and not so penalizing to the Small Business. On jobs, you know, the more we can invest the more we can grow, the more we can hire. Im involved in some Training Programs in the chicago land area bringing folks out of the inner city training for good jobs. We need this kind of growth and opportunity. I think if you do the tax reform, you will see that. One of the things thats always concerning to me especially on pass throughs a lot of people think maybe youve got 150 employees. You happen to make 800,000. The owners dont take all the money out. They might take 150 out. The balance of the money goeses in to grow and expand the business. Mr. Farr, you represent a large industry. A lot of these entities are pass through entities sub chapter s, llcs. Whats your thoughts by the fact that they can keep a little bit more what they earn in the business what, difference is that going to make from your experience . It makes a big difference. We have 30,000 people in the United States across all the states, both democrat, republican plants everywhere. Were very Small Business oriented and use Small Businesses supply to us. If theyre not healthy, they dont have the money to investment, theyre not going to have the best equipment. Theyll lose business as we take it elsewhere. The Small Business tax rate needs to come down and be closer to the Corporate Tax rate so they have more money to support us as we grow. Theyve not had the money to investment to keep us with us so were moving and looking for other people to supply us. Thats a big issue for these people. And i also want to agree that you know, make a comment we employ not only high priced people, we employ low priced people. We have all Different Levels of people employed across this country. In the state of florida, i think 93 of the enterprises are pass through type entities. Mr. Stevens, would you like to add to that. Quite frankly, the competitiveness issue applies across the board. Hightach rates gives them less money to investment, less opportunity to generate jobs. All 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 i think in the last ten years or lately, weve got more businesses closing than opening. So weve got to have a a tax code that doesnt penalize people. Mr. Ratner, would you like to add . Again, if you disagree with it, my thought is its 44 , can be up to 44 for a lot of passthroughs. If you put state income tax, new york, im sure illinois has a substantial tax, its a big number. Whats your thoughts . Respectfully, congressman, id make a couple other points. Certainly, look, lower taxes are good for everybody if we can find a way to pay for it and if it can be fair. With respect to pass throughs, remember a couple things. First they chose to become pass throughs. They could have become sub chapter c corporations. They felt a pass through with a single level of tax was advantageous. Secondly, by number the pass throughs are vastly Small Businesses in terms of where the income is generated, ive seen studies that between 40 to 50 of income is generated by larger businesses or very wealthy individuals. Have i many friends in the Hedge Fund World in the private equity world and Investment Management world where structure pass throughs for the reasons i said and they certainly do not need atach cut or deserve one. While im sympathetic to the genuine pass throughs, i think the devil will be in the details of you structuring something that actually helps the people who need help without benefiting a lot of rich people. Thank you, mr. Peterson, real quick. Id add that it also makes these businesses much more attractive from a credit point of view, small banks providing credit to Small Businesses is critical. That kind of cash being able and capital in the business helps that is very much, as well. Thank you. I yield back. Thank you. Mr. Larsen youre recognized. I want to thank all the witnesses, as well for your expert testimony. As rich neil has spoken, were very concerned about whats happening to the middle class since the chairman points out this is a generational opportunity for all of us. And as mrs. Rosskam said, we want to make sure that we get this right. In fact that, the last time generationally we took this up and if you look out into the audience, it was labeled by one author the battle at gucci gulch. And we dont want to see a return to that. And so my first question i have two, relates to all of you. And thats a commitment. Our most recent history in the committee with respect to a major reform had to deal with health care. We believe on this side strongly that we need to return to regular order and that we need to have witnesses like you and an open process throughout are both sides actually participate in the drafting. Because i think as many people have pointed out, without that, were not going to get the permanency or the longterm 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 that this should end up in some closed door process . I think its a pretty easy answer. Mr. Stevens, well start with you. Respectfully, congressman, my expertise is in taxes and financial matters. Ill respectfully leave that to those to talk about the health care process. But given thats your expertise, wouldnt you like to see the open exchange of ideas . I think i would hope that that is going on today and everyone appreciates open ideas. Dont you think we need more of that . It is going on today. Mr. Mottl. More information is always better but i hope that is what were having today. Thank you very much. Mr. Farr. I like more dialogue. Hopefully i dont have to be on another panel and be harassed. I hope you dont consider this harassment. Its special love. Lets put it that way. Mr. Peterson. Im very pleased today youve open the process of starting hearings. I think getting more and more data about the impact of the different tax proposals is critical and how you do that is also valuable to have more transparency on the process. Mr. Ratner, special thanks not only as others have mentioned with respect to the Automobile Industry but your charts and graphs which have been very illustrative in town halls that ive had and in your arguments because i can anticipate that you would also be in agreement about the openness, you did say in your remarks and you mentioned three things that if you could in the short term that you have dwell on. One of them you talked about how excessively narrow this proposal was. 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 the number of the questions from mr. Lewis to mrs. Thompson about making sure that this is the code has got to be more distributionly neutral. Thank you, congressman. Yeah, i think those three points are all interrelated in the sense that i think that to simply focus on one or two provisions affecting business as the centerpiece of tax reform is excessively narrow. As i said a few minutes ago, i think that the committee should be and i think this gets to your point about openness. Having more hearings would be great and to congressman lewiss point, hearing from a wider variety of people would be great. Were all businessmen. And there are a lot of other people out there who will have useful views for you as you think about this. But i do think each of these provisions or pieces of this are just a piece. I think that as part of the effort, if i were in your shoes, i would be trying to balance, look across the whole spectrum of tax possibilities and things within the jurisdiction of this committee and come up with a package that is balanced and fair. And that in its entirety addresses the issues weve talked about which are the complexity and the loopholes in the tax code, the disincentives and the fairness issues. And thats why you said in its current form its excessively narrow. Its narrow. Any thoughts on expanding that and commend the chairman and i know the people on the other side of the aisle want to get to this. Theres broad agreement but i think and we had great precedence set by dave kemp which i know people on both sides of the aisle admire his work. I think if were airline to sit down in that manner in this exchange of ideas and providing as much love as mr. Farr would like that we are able to create an opportunity to move the country forward. Thank you. All time has expired. Mr. Smith, youre recognized. Thank you, mr. Chairman and thank you to our witnesses here today. I think this is an important discussion, important conversation that we have. I appreciate the perspectives that you bring, multiple perspectives i will add. And its, i think, this panel represents multiple perspectives, as well. I think that as we sicht through this, i hear from nebraskans as a representative of rural and remote nebraska. Theres a frustration that perhaps just waiting and top punt perhaps 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 we have already heard. I know that 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 well, you know, if you narrow that down to few enough people, that makes it fair. I disagree with that. There will still be people harmed, individuals harmed, certainly Family Businesses harmed. And i think a family byes particularly in agriculture that are not awash in cash and liquidity. And i would imagine there are many familyowned 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 why not to do it that i dont think are certainly as important of reasons why we need to do this. Move forward, involve as many people as we can and thats what we have been doing. I know the working groups 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, in my district that and the necessarily headquarters for Large Companies but we have manufacturing plants, we have various locations of Larger Companies perhaps. I was wondering if our panelists in terms of manufacturing or services could you elaborate on what tax reform might do for individual locations, satellite locations or facilities and their employees around the country, perhaps starting with mr. Stephens. Ill give you just a personal experience. The chamber of commerces in dallas 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 you that this overall tax reform bringing down the top tax rate, providing incentive for investment will generate jobs across the country 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 illinois, some budget issues there. Businesses are leaving our state as a result of it. And theyre concerned. I think it speaks to its a great example when you do tax reform if we can get it done in the u. S. , you bring businesses all back to all states. I wanted to make a comment to a comment made about switching our tax structure. I would love to do that. It would trigger a huge Tax Liability. We have a c corp, two s corps, llc. Id love to get them aligned to have the fiscal year end on the same date. I would trigger Tax Liability i dont have. Weve had to pay tax years and triggered a Tax Liability in unusual years where we didnt really make a profit but triggered a Tax Liability. These are these crazy quirks in the code we really need to address. Its particularly onerous on Small Business. So my comment, i look at at t, if they increase investment, infrastructure of the internet and the uses we use over the technology of their services that will increase my investments in those particular areas. As they invest in texas, i investment in texas. If they invest in the minneapolis, i invest in minnesota. I look at the tax structures of each state. Would i go to illinois . I get concerned about the health of illinois right now. As i look at the states i want to investment, its around the policies relative to the state, tax structures, benefit of the local governments and they help and work with you. Thats why we make those investments. It pays off of what at t does or what we do. We help each other for those instrucT Investments. Mr. Peterson. The base of your question is about the competitiveness of the u. S. Economy. We have the best university system, the most inratetive people in the world. We have a rule of law and an energy boom which attracts. New companies around the world looking that 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. Theres so many different advantages we have today but we lose out on many of them because of the broken tax system. Thank you. Mr. Blumenauer, 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 we were talking 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 involved in the International Economy realize in terms of roads, transit, air investments, United States is sadly lacking. Sadly lacking. 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. Its 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 repatriatization can be sweented by maybe moving that book into our woefully inadequate infrastructure spending. Theres admittedly a little disagreement about prepatrioted dollars and who benefits. Some people have different ideas for it. But one of the things and mr. Farr, i would start with you because governor engler on 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 Washington Post creating jobs in every single state, every single city and maybe wed be in the process of learning how to length late again, do this kind of build those flex those legislative muscles. We could he have panels like this for a week and listen to the president of the aflcio, the president of the u. S. Chamber of commerce, the president of the contractors, governors, South Carolina where Legislature Just overrode veto of their governor for raising the gas tax joining 23 other states that figured out how to 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. Id like to simplify our tax structure to make it more competitive. Infrastructure investment is critical. We move by rails, roads, airports. Weve been pushing this for many years and not gotten it 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 investment in infrastructure. I think those three things around regulation, around around infrastructure, tax policies to make this country competitive, we compete with all those things hurting us today. We could be better. And my question was, do you still support raising the gas tax. I still support finding funds to pay for instruct. I mean mr. Ratner, do you have an answer to that. I certainly support raising the gas tax. I was in the car business for a little while. I think the gas tax hasnt been raised in decades. I think thats right. 24 years. And you made all the right points, congressman. As a matter of both infrastructure policy and energy policy, it is crazy for us to have a gas tax at this level. And top allow our infrastructure to deteriorate. Mr. Chairman, i appreciate your courtesy having this hearing. I appreciate our panelists raising important issues. I would respect flit 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 u. P. S. If they lose 50 million for each five minutes delay in traffic. Invite in some of the republican legislators from the 23 states that have raised the gas tax to find out why they 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 aaa. 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 could break the log jam, do something to jump start the economy and that would help aease some of t other issues were talking about because it would certainly increase productivity and it might be fun. Thank you, mr. Chairman. Thank you. Miss jenkins, youre recognized. This has been an informative hearing. I thank all of you on the panel for giving us your time today. Mr. Mottl, i know youre from illinois. 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 and an llc, and as a cpa who didtach planning, i would just want to applaud you for the 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, simple and a fairertach system that an wl 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 100yearold business. The c corps came if the 70s, the s corps came from the 90s and they were all done there was tax changes going on all the time and reasons to do these things. But id love to simplify it. Like i said, 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 contribute to a 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 ownership to myself and my sister. So we would become a womanowned business and in order to do that, we would trigger a 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 is a great example. You know . I think connion taxes is an important focus. Why are wetaching income . We want 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. I think its been reported that american businesses spend about 3 billion hours and 150 billion complying with this outdated burdensome tax corrode thats on the books. Could each of you just comment quickly about the cost 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, our shareholders put up about abou 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 do 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. 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. From my perspective, what we look at is, were trying to invest to grow and im trying to allocate those resources. One of those 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. Kahn, youre recognized. Thank you, mr. Chairman. I want to thank the witnesses for your testimony today very helpful and hopefully this will be one of many hearings we have moving forward on the complexity of taking a serious run at this code first time in 30 years. First, mr. Peterson and mr. Ratner, i dont think you had an opportunity to answer mrs. 11 s 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 rates at the end 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 will find ways to ensure that we can pay for them, that theyre in addition to being permanent and comprehensive, that theyre also fair and find a way to ensure that we have pay forwards through them. Mr. Ratner. Yes, i think ive made clear my view about the fact that we should not have a tax proposal or tax bill that increases the deficit when its scored using conventional means. We can have a debate about that scoring, but i would not want to see that be part of the equation to come up with a tax plan that doesnt increase the deficit. Theres i think great consensus in congress and perhaps throughout the nation and its long past due for us to take a run at the code, over 30 years. Its antiquated, outdated, too complicated, left us less competitive right now. Come Compliance Costs are ridiculous. This is an opportunity for us to do it. My fear as we approach this is the easy defought position when we get into the complexities and how difficult the tradeoffs have to be made is that congress oftentimes lapses at the end of the year with the need to get something done, cut rates, dont pay for it, declare victory. Go home. If thats where we end down on this, what would each of you think . Would that be a success of this congress or a failure of missed opportunities . Mr. Stephens. A comprehensive plan that lowers rates and encourages investment would be a win with a prudent tradeoff for all financial considerations. That had be a win, yes. Yeah. Mr. Mottl, if we end up though just cutting rates, no the paying for it, declaring victory, is that a success or a missed opportunity . I agree with you. Thats why im proposing we also do a goods and services or some other border type of adjustable v. A. T. Tax. You broaden your base. Im proposing this offsetting credit on peoples taxes they pay on their wages. Its 15 for the average American Worker that they pay in federal taxes. I know theres concern about Social Security. First year that its on the bottom of the statement, i read it every year, the first year theres not going to be enough funds to pay benefits is the first year im eligible for benefits. I share your concern about funding Social Security. Thats why my proposal is an offsetting credit. You keep the Social Security taxes on the payroll and they into a bucket. From the goods and services tax, theres a credit. So you protect the dedicated cash flow so important for Social Security. I appreciate it. Let me move on with another question. One way of building by partisan support is tieing it tax reform into a major instruct reinvestment plan. Its one of the leaders in the new dem coalitions in this house, were 61 strong right now. We sent a letter to mr. Trump yesterday asking him to approaching tax reform with a tiein with instruct investment. Mr. Chairman, i would ask consent to have our letter submitted for the record at this time. Without objection. Mr. Ratner, i know you havent been the biggest friend of repatriatization in the past. We have a ton of money overseas not used efficiently. Weve been focusing having a fixed rate dedicated for infrastructure as part of the revenue stream that we need to get going on this. Do you have any opinion about that. Have i not been the biggest fan of repatriatization because the evidence doesnt suggest it would make much of a difference. We tried it in 2004. It didnt make a lot of difference. Theres a lot of cash on companies Balance Sheets theyre not investing. In return for getting critical money for instruct, i would entirety demand or actual repatriatization tax if that money were channeled to a useful purpose going on the instruct issues. Mr. Farr. The reason why they didnt have much impact is it goes back to permanence. I believe if you have a policy just like our european policy is, everyone brings the money back, you pay a simple tax. That money will come back to the United States and it will be invested in the United States. To have that money here is a good thing. Hopefully wellened 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. I yield back. Thank you, mr. Paulsen, youre recognized. I want to thank also all the testifiers today. This has been very enlightening testimony. From my perspective, i continuously hear from Minnesota Companies about the importance of having major tax reform that is permanent, that promotes investment, that lowers rates. And it will boost paychecks, increase jobs, help the economy. I hear that all the time. We know the Larger Companies that i have in my area, its the 3ms of the korld, cargills, larger institutions that employ so many people but its also the main street businesses that people have never heard but so important as the engine of the company. I think of a plastic injection manufacturer that i had a chance to tour or the baldinger bakery that i had a chance to visit ha produces the buns for mcdonalds looking for a more simplified tax code. Or even the recent example of a letter i received from don, a small position owner in minnesota who writes in saying we have a once in a lifetime generation window of opportunity to unleash a Strong Economy and repair and simplify the tax code that is helping hold back our Small Business economy right now. What i think is striking about these messages and what you shared today, theres an acknowledgement all of our job creators both big and small are in this together. So simply put, regardless of whether you work at a large or a small company, these businesses and men and women who are working alongside them each day will benefit from fixing a broken tax code. Were talking about lowering the rates, havinger. The reforms. We can plow more money into their paychecks and investments and higher wages. So mr. Stephens, had you mentioned right after the bat, this is about unleashing Economic Growth. Esmr. Mottl, you mentioned three different types of tax filings you have to do. And its important to level the Playing Field and mr. Farr, youve talked about the importance of manufacturing. With twothirds of manufacturers particularly paying under that high individual tax rate. Ill start here. Weve all shared the perspective already. But it is well documented, mr. Stevens, that our current height Corporate Income tax rates severely does reduce domestic investment and entrepreneurship, as well. How would new investments made as a result of a 20 rate affect communities . What might it mean to the local suppliers which i think mr. Farr talked about, contractors, vendors that you partner with in 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 . Thank you for the question. Quite frankly, its it would have a direct, immediate positive effect on our develop doors and suppliers 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, architecture work, you put to Work 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 could go to work and in the cases of many of the people, their wages could go up because theres more demand for their services. This then would start that cycle that comes back 0 demand for our services, demand for mobile phone services, television services, Broadband Services so it has a Virtuous Cycle. By the same token, i think this is really important. State and local governments would see an immediate uplift in prosperity because this would generate jobs, payroll taxes, generate sales and sales taxes, it would generate investment in assets that generate property taxes. Once again, that generates additional demand for our services and other Large Companies services. So it would this cycle of continual growth. Thats so important. As we have had 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 acting quickly to get that done now will be an important answer. Keeping headquarters here, keeping innovation here, lifting our economy for everyone is it going to be a longterm boost with permanency, right . Mr. Mottl, ill keep going going down the line. You mentioned the business in your district that makes the bonds. The purpose of those businesses is to make the bonds and make the plastic parts. The secondary effect is hopefully they make a profit, right . So i believe that if we help these businesses be better what theyre doing, have more capital to do that, they will investment in making more buns, making more parts hopefully they make a profit, as well. Keep in mind the primary purpose is to do what they do. If you give them the resources to do that, they will. We have two facilities. Were invest is and moving jobs back into the country. And it will help obviously from a Technology Jobs standpoint. It helps education, helps employment, helps everything around that area. From my perspective, it spreads out and helps a community in a big way. Just like it hurts a community when we leave. Mr. Farr, i visited both in those facilities and i heard the same message there. Thank you, mr. Chairman. After your questioning, well move to two to one ratio Going Forward. Youre recognized. 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 your effective tax rate is now. And im sure youve done the numbers. If the ryan brady plan becomes the law, what will your effective tax rate be . You see, we have a problem. I listen 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 tax reform does 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. Rattner, 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. Rattner 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 diverged 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 heretical 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 earned 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 hypocritical, 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. Marchant, 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 tax reform. Were for it because it will increase investment 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 broadband and other services out because those additional investment dollars will go into those 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. Motti. 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 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 100 with the first 2 statements. I would add, i would say, look at. We have investments around the world. If we have a competitive 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 from 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 would do. Yes . When i talked to our employees about the comprehensive tax reform that i know all of you are going to do, 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 100yard dash and right now were starting 20 yards behind. Were running 120yard dash against the rest of the world whos run a 100yard dash and this going to put us back at the start line at 100yard 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 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. And i think 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 listened 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 ever 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 so, mr. Rattner, 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 for relative to the benefit of the average worker may not line up properly. Thank you. Congressman, you and i are neighbors in 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. 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 the Playing Field. Thank you very much and i yield back. Thank you. Ms. Black, youre recognized. Thank you, mr. Chairman. And i 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 regulations 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 Small 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 model 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 amen 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 all our workforce and were spending million of dollars right now because without them we wont have a manufacturing facility. But the research and Development Credits are very important. American companies are very inno evacuative. Were the most innovative in the world. 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 really 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 do your employees do better . Our employees do a lot better. And why is that . Because you need good employ run your business and without them we invest in education, employees, local education, put the money back in. All works together. Mr. Peterson, on a similar note you described the increasingly Important Role of the service sector. Are there tax policies 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 specifically. 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 Capital 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 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 rises 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. Keller, youre 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. Rattner, youre not a car guy. Im a car 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 sincerely because ive never done your job and youve never done mine but i know the reason. Im here today because one franchise 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. Ive looked at this every which way we can from death taxes, were third again. Adds we look at all those things and it better be pro growth. I am just really concerned as a country thats going to have regular revenues still cant come close, cant come close to paying its spendings. You couldnt do it in your business. None of us could do it at all. I worry about that. And mr. Rattner, you are concerned about definites. I am greatly concerned. I know that when president bush left office it was almost 10 trillion and what president obama left it was you will most 20 trillion so the concern with that is enmesh able. I dont know how it grew that fast but it did. Pro growth. Pro growth. 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 making sure that all of you folks that pay every penny, by the way, 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. One was in 2009 when the annual rate went from 16 million to 1. 5 million thats a hell of a hit. It wasnt a matter of policy. The world was upside down. So anything that you disagree with what were doing or attempting to do because we all agree that if your healthy the 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. This 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. Yes, mr. Stevens. Congressman, only thing i would add is only thing id add is you aurgency is importan 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, you 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 begun this process and having this hearing and this is going to be hard but because its hard doesnt mean we shouldnt do it. Mr. Rattner. Im a shrub and i dont know if shrubs 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 whims, okay . So i dont want to yet moo that right now although we are but i am going to say this, im reclaiming 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 finally getting 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. Rattner. Thank you. 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 heard. 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 piecemeal. 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 puts American Workers and the domestic business that they employ that employ them on an even more unequal footing in our tax code. Our tax code is woefully out of date, but how we get from here to a revamped tax code really deserves some thoughtful deliberation, and we really 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 is 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 ageing 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 that does anything for a good 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 an existential 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. Rattner, 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 plus for Economic Growth. Thank you. Time is expired. Mr. Donacci, youre recognized. Thank you, mr. Chairman. And i want to thank all the witnesses 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. 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 got to 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 represented at the panel. But the truth of it is thats the hard working 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 sure the u. S. Is more com tet. 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 we have 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. Rattner, 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 thinking would be we 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 and 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. Mottl . Lower it, simplify and it change the way you collect it. Mr. Stevens. Lower the rate, create a cycle of virtuous 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. Mr. Peterson, in your testimony youve pointed out numerous times the competitive flaw in our current worldwide tax system versus territorial tax system. And, you know, this is 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. Headquartered companies. The other include greece, chile, mexico and south korea. Even more exclusive company were only one of two countries, aratria being the other, to tax the worldwide income of u. S. Citizens that live and work in foreign jurisdictions. Now we stand in even more exclusive because were the only 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 testimony 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 operations globally one of our largest competitors it pays a rate of about 12 . Theres another one our competitors that did an inversion and moved their operations to the United Kingdom and went from a 30 tax rate to a 12 tax rate. 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 expatriates 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 increased 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 us to 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 telling 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 differential 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. All right. All right. 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 when we address the territorial, the global the territorial system, we need to address how our citizens 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 companies as to how the rest of the world treats them for tax purposes. So with that, mr. Chairman, i yield back. Thank you. Ms. Sul, youre recognized. Thank you, mr. Chairman. I want to thank all of our guests today. This is 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 a 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 Businesses 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 really 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 collaborative work. We all want this tax reform to truly be lasting and not just a mere oneoff. Every day im honored to represent my home district of alabama, the seventh Congressional District. The Median Income into my district for a family of four 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 winnerswinners 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 tax 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 tax reform. I know the folks that i represent have been waiting for trickle down economics to 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, mr. Rattner. We talked about making sure that any tax reform is 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 middle 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. Sure, congresswam. 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 think i would recognize that the president in his plan does propose to simplify the deductions on the personal side. We can debate 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 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 50 of this tax cut would go to the top 1 an average of 317,000 each. So that doesnt seem fair to me and i dont think its complicated to fix that. Its simply 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 complicated. Its just 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. I know for me, the future of work in the rural parts of my direct is really quite scary and so incentivizing Apprenticeship Programs and Workforce Development and workforce 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 Development . For sure. First of all, you have to know im a nine iron from ferguson. And we put 12 million in ferguson for two years including an Apprenticeship Program for the high school kids. I went out and raised 2 million. I think you find businesses do this and we dont really need incentive from the federal governments. We want to help our communities so i think you will quickly find out that businesses if they are really engaged in community will do it and i do this lively and in ferguson much better than it was two years ago. Thank you, mr. Chairman. Thank you. Mr. Schweikert, you are recognized. Thank you, mr. Chairman. And when we all sit down here we have a series of things we think we want to ask and this is to all my brothers and sisters zitting up here on the dias. Maybe im pathologically optimistic. Outside soft of the political banter thats obligation to throw out, if you hear from the right and the left here, i think theres a universal understanding that we need big, bold, comprehensive tax reform. This discussion, if you actually look at what were doing, you know, and, look. I dont know whatever noise is out in the rest of the world, take a look at our documents. This isnt just about rates. This is bigtime reform. And so, look. I have a personal fixation on this concept of velocity in our society, how many of our brothers and sisters out there all up and down the tree, if you actually look at the last ten, 14, 15 years, how Little Movement there really have been from different sort of stra us cases and thats a crisis for society when you dont see that movement. Im desperately hoping for all of you as entrepreneurs and investors that a comprehensive plan as were moving forward is great for the society, from, you know, the person entering work force to the person who just wants stability and wants opportunity. Mr. Farr, one of the things i wanted to come to you about was when you also look aT Investments around the world, and youre making that decision of, you know, your shareholders, those what is in this tax plan, our tax plan, that makes you decide its going to happen here in north america . Whe what are we doing right and what would you change . One of the panelists said, i think, education in the United States is truly unique. We have a unique Education System that drives innovation and technology and i think if you continue to encourage that in this tax plan thats important. Secondly, i think getting the tax rate down so when i look at the tax costs to do business in the United States versus england, versus uk or china, wherever that is, getting that tax rate down that takes it off the table. For the productivity, the education, the strength of the u. S. Worker is very strong and very important. That is your baseline. Now were coming to you saying were about to do comprehensive tax reform for our society. Does the expensing, do the rates, what are the drivers that say, youre going to continue to invest in our communities . I think all those come into play from the standpoint that acceleration of the depreciation makes a big difference from the standpoint of recover the cash we put in, putting the cash back out into other investments. I think the tax rate from the standpoint of how much cash we pay in federal taxes or state, local taxes make a big difference. But again, i think having infrastructure, having all the things come into play, ill go through 20 issues relative to making the decision. It is not just tax. Unified theory. Right now the job is to get the tax. Tax. Well have other thing we have to do. Mr. Mottl, you made a comment before you had to change the business model, production lines, research multiple times because you keep losing your discuss merles. Could you put a little more definition on that . For 100 years we served the telebusiness and other countries made a competitive environment for the people that made the chips, the boards and all those little pieces that go in the electronics and no longer needed me to make a housing. I went overseas to another country so, you know, i watched that industry leave. I watch for a while we did some automotive work. There were issues and now that type of work is moving. So youre speaking where i was trying to go before. Theres also a cascade effect. For all of us here, we sometimes get fixated on a single point in a complex plan. And not understanding theres sort of a unified theory where, you know, this affects this, this an i fekts that, that touches here. And this is not just business. I mean, we are also, you know, looking at how we deal with the pass throughs, also individual rates and how it all sort of unifies together. For at t, what is the single biggest driver to get you as a one of the biggest players in the world, to make large Capital Investments in this country . The two biggest drivers would be the tax rate and the immediate expensing, but quite frankly, the biggest driver would be those changes as they impact my customers. Okay. Because right now, as just as mr. Mottl mentioned, we are losing discuss merles taking the business overseas. The work of the Auto Industry went overseas where im not the primary provider. Talking about the micro boards and other equipment, i lost that customer. So for us, lets be straight. We really believe that doing these changes will generate Small Business and mediumsize Business Activity and that will benefit us through the revenue line. Thank you, mr. Chairman. Yield back. Thank you. Mrs. Laurrn ski, youre recognized. Thank you. Im grateful to second indianas second district. Very proud of the folks in our district. We have a lot of manufacturers, farmers, moms and dads trying to pay bills and get the kids through school and college. Ive heard from so many ceos in my district that the American Economy succeeded in spite of the tax code. Its not helped it. I wanted to be a part of this committee and i am grateful to be a part of the committee to actually becoming at this and i just want to run a couple of quotesen past you on what folks in my district said. Barry baldwin, a tax preparer, he talks about why its important to lower the raitds and we had the discussion for three hours on rates and my question to you, when i get there will be on rates and the issue of permanency and why its so important to you that we dont do something that would damage, you know, your interests and tax reform by not making it permanent, but baldwin the tax preparer says, more money in peoples pockets, more jobs, increase the tax base. Gary fox, a managing partner firm in the district called and south bend, he said, small and middle Market Companies unable to keep capital and invest in the business. With a current tax rate environment. He said lower rates allow for better Capital Investment. And then since were a manufacturer, we manufacture nearly all the rvs in the country and boths. Peter barrett, senior vp of smoker craft said that tax cuts will allow his company to hire more workers, raise wages for 600 employees, create training plans, expand the plant and make equipment purchase, none of those things he said happen in a vacuum. So, you have heard from my district. I have heard from you. But as you touched on this earlier, why lower rates are so important, but i guess when we talk about this, the benefit of lower rates and you touched a little bit on the issue of permanency, i think its important as we talk about this, we talk about what the distractions can be if this isnt permanent. Thats how id like to hear your response, the issue of permanency and why it should be a top priority. Mr. Stevens. So far, from most of the Large Companies, Capital Investments are multiyear projects. Takes year from the start to completion. As the rules change, inconsistencies change, the rules change once again for the customers and so we see demand for our services change, it makes things inconsistent and it puts higher risk. Higher risk makes people in our world be more careful with their investments. It is just a prudent responsibility to our shareholders so whether thats in tax rates or uncertainty, regulatory conditions, that goes to uncertainty and leads to less investment. I think ive spent sometime in your district, visiting the rv manufacturers. Goshen, indiana, is out there . You bet. Great area. The thing of the concern and risk of constantly changing, we talk about in congress we cant get things done because of the distraction, no air in the room. Same thing in business. Constantly concerned about changes and whos going to jerk our chain next, we freeze up and pause. So i think its so important to have a consistent policy. You know, also, ive heard a lot about supply side things. We are really talking here about demand. Im not an economist. Im a manufacturer. We keep hearing about supply. We want to generate demand. Demand for American Workers, trarning, demand for skills. I have a skilled Work Force Shortage in the area and cant hire the people to run the machines that we need. As do we. Ive had to raise wages. If we create demand you will see more of that. Thank you. The key issue you hear from you have a medium, small, large business. Were interconnected and the permanency is very, very important. We make longterm plans and if we have the risk area to go away next year, we factor in, slow it down, spend less money but it does have an impact. Why the rates are important, i operate in a global marketplace. Half of the sales outside the United States. My major competitors are german, french, german, french, maybe a japanese. If we have higher rates, i lose business. I lost an acquisition in germany to a French Company for 500 million acquisition. Same forecast. My tax rates, 37 . His tax rate is 20 . Uhhuh. I lose every day of the week. Mr. Peterson. Taxes is a major expenditure for us. As i mentioned, 560 million last year in the u. S. If we knew what the cost was going to be and it was lower than that, and were able to predict it over the long run, we can have a completely different planning cycle and also invest for the long run. Permanency is critical to this package. Mr. Rattner. I would certainly echo that but i would also just mention something that the committee is well aware of and achieving permanency creates an additional burden in terms of how this package is constructed. In terms of the legislative process, particularly in the senate that youre obviously all very well aware of. Thank you. I yield back. Collecting feedback about what tax reform means to them. I represent a very diverse district in Washington State with industries raging from a booming High Technology sector to Life Sciences and agriculture and i can tell you that my constituents are asking for middle class and Small Business tax relief, not massive unpaid for tax cuts for the wealthiest americans and large corporations. I heard from a mom whos struggling to pay tuition for three children in college and could use a little bit of relief. Instead of putting that money back in the business and hes still paying a high tax rate. There are countless stories. We have heard some here today just like this across the district and the country from hard working people who just want a bit of fairness and simplicity out of tax reform. And weve talked about simplicity. We have talked about certainty. Also, very important. Weve talked about competitiveness. I want to talk a little bit, though, more about fairness and true impact. And so, i want to share some data about what happened after the bush tax cuts. According to a u. S. Census report, medium Household Income in 2007 was lower than it was in the year 2000. And according to the bureau of labor statistics, employment and wage and salary growth were lower than in any Previous Post world war ii expansion. Pointed out with no meaningful positive Economic Impact. So i think the lesson of all that is not to do it again. And how should that inform us Going Forward given as we look at tax cuts in particular . Well, that should inform us first and foremost that they should be deficit neutral. And you all youre not in charge of all spending but you need to make with your colleagues that the package that goes through is deficit neutral and while i think theres a benefit of reducing rates generally, we should, also there was a discussion of r d and we should also look to make im not in favor of number of gimmicks but we should make sure that the tax code is created incentives not just to invest but to train and educate. Thank you. Mr. Stevens, you said i think pretty straightforward, more investments equal more jobs in your testimony. In a jobs in your testimony. In the 2016 times article gearing up for the cloud, at t really talks about at t shifting their business towards a digital and computing tapes business. There is a quote of articles that at t could get by with onethird fewer workers, automation and etcetera, so while you work with your work force to train for the job s of the future and if you have less than a work force due to automation and technology changes, that means fewer inv T Investments mean more jobs or workers. Investment alone is going to equal new jobs since we talk about the new economy, i wonder if you can comment on that. Our business is changing. If you are like any childrmy chu use a mobile phone. We have gone through about 55 millions of those dial tone phones. Business changes. We need people to take care of a 40 or 50 customer base. We are giving opportunities to retrain themselves. We use nano degrees. Giving our employees an opportunity to train themselves in the next generation of products. I just want to i understand that retraining just so means there are less jobs and more investments meaningless jobs. I am running out of time, it is important that i have an honest conversation of what Technology Means and where we put the work forces where we have an economy that works for everyone. I am out of time. Mr. Curbelo, you are recognize. We have education and incentives thatll give families flexibilities and saving for their children and seeking solutions for people of puerto rico who face the economics outbreak. Tax reform is about freedom and opportunities for the American Family of today and those of the future. I think of my immigrant parents and how theyre able to come to this country and earn success. When they first arrived, it was tough. My mom helped her mother run a small fabric business. On some days my dad sought food and could not find any. Thanks to the possibility afforded to them by the American Economy, they were able to earn more and put away some money and buy an apartment and start a family. It was not as expansive as it was today but opportunities were bound less. My wife and i think of our own two daughters, i want to make sure they can find their own success and blossom. The decisions that we make in the committee will make it more or less possible. I think of all those young people who went to college and cannot find quality jobs and the moms and pops bakery and restaurants stopped by the morning to grab my shot of cuban coffee. The country will offer them the opportunity to grow or invest or will we just sit back and watch opportunity in our country diminished. There is good news in the blueprint for every florida family. My state could see as many as 97,220 jobs and income of 4,008 of household. To our witnesses today, i have one question very unique to my area. Miami south florida is often called the gateway of the americas. So many opportunities and so many ways to access different markets from miami, however, we also face competitions from all those countries and Central South America and really all over the world. Miami is becoming a Meeting Point for people and goods from all over the world. Given your perspective for those entrepreneurs in miami for those who are creating jobs and innovating and opening new markets for american products, whats the difference for them between permanent comprehensive reform and short term tax cuts, mr. Farr. Thank you. The big impact for people starting up is having a known tax rate and allowing them to make the longterm investment. You are putting the money on the line, it is going to be there for a long time and you want to know the tax rush. It is critical for the young people starting up these companies and having the knowledge of what the tax breaks are and the rules and making them simple. I have hundreds of tax lawyers and Tax Accountants to deal with it. Invest and grow. Mr. Stevens, i want to offer you the opportunity to send a message to the American Worker. We all know how frustrated American Worker is. A lot of people in the country dont feel success is obtainable for them and a lot of young people going to college and get a degree. They were promised to find a good job and they cannot find one today. A lot of these people have watched over the last seven or eight years of the economic recovery where the wealthy have done quite well. Low and middle income americans have struggled. Some of these people maybe watching here today one or two of them and hopefully more. What do you have to say to them and why is this important and how can comprehensive bold, tax reform improve quality of life for middle and lower income america. For all businessman, the question of investment comes down to what returns we can make and when the government takes 40 of the fund state and another location taking 20 or less, making it difficult to make the decision to invest here. If we balance it out and make those competitive, those investment s will come here. This will be the biggest job builds that the committee can support. With those dollars and investments come the opportunity to do research and innovation and construction. So tax reform equals more and better jobs. It is a job build lesson. Thank you mr. Chairpersman, yield back. Mr. Bishop, you are recognized. Thank you for being here of this important hearing and thank you for your tenacity. Thank you for sticking out with us. I am last of the group, you and i will be the last. So much had been discussed. We all have the same interest we want to deliver comprehensive tax reform. We think in this case the blueprint in front of us will be delivered profound tax relief to all americans. Thats what we are opened to see. I am from michigan. A lot of great things out of michigan. Manufacturing is very important and life blood. I want to share with you a letter and article that i read in new York Magazine on may 15th from a gentleman by the name of mark scmithd, they are out of rosenfield, michigan. His testimony is alarming. Given the fact that this is america. We cannot afford this to happen but he suggests that United States, many factory sectors are dying. His business full of employees and high skills and welcome sated work force is being choked off. We have done nothing to level this plainfield. I would just like to know given the short amount of time that we have and i know you cannot do everything to give solutions here. His suggestion is that the chinese prices are so low that they cannot afford to buy their major manufactures anywhere else. They list why they are low and most of them have to do with china subsidizing their business. The industry has lost approximately 7 of its companies and 80 of its skilled jobs. The most alarming thing was our industry will soon lack sufficient capacity to supply the free World Automotive markets. If that does not send off bells or whistles. This is the urgent thing that we can be doing right now in terms of public policy. I dont know what will. I guess i will start with you, what do you think about this. Is there anything that we can do right now that would address this problem . Thank you mr. Bishop. I hope they reciprocate. The issue talking about is whats happening in my business, too. The problem is, we need to make a profit here. We are competing against companies that dont need to make a profit. Their banks will give loans and loans just to have full employment. The chinese just threw their first jet liners. I have talked about the industry that i have lost. I am worried whats going to happen to the aerospace industry. Thats a fine strategy for that country and kudos to them for pursuing it. How can we engage in a different way so companies can be competitive and we can create demand in this room as we are talking about it today. Thank you very much. I will tell you what, we lost so much of our Industrial Base because of our tax policies. We have allowed these companies to leave and technology to leave, president roosevelt took over our facilities manufacturing 1939 for one reason. He took overall our plants and putting us out of business because we cannot make motors anymore. This technology is leaving. Again, putting money back to education and r d, we can compete against the chinese if we have a level plainfield, americans want to compete and win, i believe that wholeheartedly. Thank you, gentleman. Mr. Chairman, i know your press of time, i saw you yield back. Thank you. Mr. Rattner, i would like to ask you of tax reforms as it relates to Small Businesses. I serve also on the Small Business committee and it is because i truly business believe that Small Business is the key to American Dreams. My grandfather came to california with nothing but opened up a Small Chinese restaurant and had a handful of employees and it was not a fancy place and he worked night and day and it was enough to keep the family going. The trump tax plans slashes the tax rates for pass through entities from the current rates to a rate of 15 , claiming that this is a tax cut for Small Businesses, but just this week the tax Policies Center found over 3 quarters of the benefit would include to the top 1 of earners. In fact, the top 1 would see their after tax incomes climbing to 60,000. Can you elaborate how this tax cut is so beneficial to the wealthy. Elaborate on what . How this tax cut will be beneficial to the wealthiest. Equity funds and businesses and publicly traded firm that are taxed this past through and billion dollars plus market capitalization. The idea of lower the tax rates for true Small Businesses is certainly a worthwhile goal. I expect some skepticism of the ability to address the tax and paying the fair share and the other Group Getting some benefits. I think it is a hard thing to do and our Current System with the pass threoughs is a better systm without lowering the rate of 50 . Let me follow up on that because so many people referred to the past incomes as it was Small Business income. Many argued that this type of rate reduction is critical. Can you tell us what kind of businesses will qualify as pass throughs. Are there any extinctions drawn between the mom and Pop Restaurants or wealthy lawyers lobbying for them. Whether t will the Trump Organization be a pass through . I am not sure how many benefits well get. The administration will address the problem that you and i are both talking about of excessive undeserve benefi undeserved benefits going to wealthy individuals. Impersonal i am personally and skeptical to draw those lines and giving benefits to those who deserve them and having a lot of leakage. I have many friends in the Investment Business offering pass throughs and i dont see any reason why i should get a 15 tax break. Let me turn to the kansas model. I was interested in seeing that in 2012, kansas cut taxes dramatically. They in fact exempt at pass throughs at paying any state income tax at all. They cut the taxes on profits for more than 100,000 businesses. The larger benefits were for upper middle class households. Tlchs massive revenue losses, kansas was then forced to raise the sales tax and get pension payments and Shorter School Year to save money. Can you comment on what is happening in kansas and how can we avoid this pitfall in the federal level . I am not an expert in kansas. It highlights a critical issue that we talked about here. It needs to be front and center. There is no free lunch, unfortunately, well cut taxes massively and so much Economic Opportunities and somehow make up for that loss revenue and it did not happen. Tax cuts are fine but they do not pay for themselves. Thats the lesson that this committee needs to be mindful of and it should be deficit neutral using reasonable economic assumptions. All the things that we advocate, you have to find a way to pay for them. Thank you mr. Wright. Thank you mr. Chairman, before i came here, i was chairman of Horry County Council and South Carolina. I saw firsthand how counties compete vigorously to attracT Investments. To be morkeith activie competit attract volvo and mercedesbenz and on and on. What is our country done . You know what our country fails to recognize and we argue about maintaining this level of revenue or that or how these benefits are going to be disburse for society. We got to recognize that we are in a global competition. You know we can change a lot of laws here in washington but one law that we cannot change is economic law. We cannot change the law of economic competition. I have a question. Mr. Farr, i thought your testimony was right on point and what other countries have done that. Just assume this scenario, you got an American Company paying 35 tax rate and you got a European Company and Irish Company paying 13 tax rate and they both compete to buy the same materials and both make the same products and compete globally for the same customers. Can you tell me the end of that story . The one with the vat taxes is going to win. Theyre going to get bought by the Irish Company, right . Mr. Rattner, do you disagree with that . A number of consequences are uncertainty. It will be a mass siive of uphel for our company. We have to recognize 150 and 40 other countries around the world including every single major industrialized country including every competitor who are doing the exact same thing and we sit here and putting our American Companies at a disadvantage. It is not one side. We have states and local sales tax functioning at a lower level. This is predicated on some very uncertain adjustment in the dollar which when it does not happen involving raising prices for middle and working class americans who typically buys a High Percentage of goods. Income tax cuts, there will be increase in prices but based on the Tax Foundation estimates, their income will go up about 4,000 and far more than these potential sales costs would. The size of the american middle class and their income level has roger goode really decline and it declined the last eight years and the eight years before that. It has been going down since 1990, 20 years. The last time the code was revised was 1986. I wonder if there is some correlation there. The decline of the american middle class and the growing in come in equality that we all fu fuss about is a deterioration of america as a replace to do business. That translates to the lost of a million of middle class american jo jo jobs. If we want to give them a raise, if we want to reduce income in equality. We must make our tax code competitive in the world. Thats got to be our number one goal. I yield back. Thank you mr. Rice. Mr. Hagan, you are recognized. Thank you mr. Chairman. A couple of things, the American Economy, we are 5 of the worlds population of 23 of the world economy. We have the strongest economy of the history of the world. Despite all the Macro Economic indicators pointing up, job growth and low employment and growth in the stock market, we lost 6 Million Manufacturing jobs in the past 15 years. 56,000 factories have closed. We just had an election where two conventional candidate candidates donald trump, beat 16 established republican candidates. Hillary clinton on the democratic side, challenged by a 73yearold socialist from vermont, got 12 million votes in one 21 primaries caucuses. There is something under loin thats not being addressed. We all have a major stake in this. Let me give you an example. 1945 and 1980, we have productivity gained in the American Economy by 97 . They were shared prosperity and a kind of virtual cycle of growth and the american ceo felt it was their responsibilities to balance the economic interest of all of the stake holders. Shareholders and owners o f businesses and managers and employees and the communities within these corporations operated. Between 1980 and present, we have productivity gain of 89 . Now, i think a lot of people would view that and that means more taxes for me and i oppose that. We can reach a point at which we can move our tax policies out of a political round perhaps, thats naive. Tax policies everyone work for a dozen. Supply side is discredited and tax cuts will pay for themselves. Tax cuts do not pay for themselves ever. What we need to do is address whats going on here in the American Economy. As i said, people voted for disruption. Mr. Rattner, let me say this to you. Supply side trickled down dynamic scoring, lets give the very wealthy of a big tax cut. That money will find its way back to the economy in new businesses investment and in job growth, right . Wrong. It has not worked. Two days, the American Companies are holding 2. 5 trillion abroad. It increases of nearly 20 of the last two years. United States Companies are holding 1. 9 trillion in cash domestically. Banks are holding over 2 trillion in excess reserves in the federal reserves. Thats over 9 trillion. Why is that money finding its way in the American Economy and why would massive tax cuts o f the wealthy had any measurable difference and what it has not done historically. I think there is a number of complex reasons. I think the issues of manufacturing in the u. S. Are not a functioning. There is a whole variety of factors and losing quite a number of manufacturing jobs. As you point out there is an abundance of capitols. Some of that may have to do with the tax codes and a lot of it has to do with the exception that our economy is not growing that fast and there is not that much demand so why build a factory to make something if you dont have the money out there to buy it. Thank you, i would like to thank our business. This is a discussion about how we grow jobs and paychecks and the u. S. Economy and the role tax performing is doing that, you made it all compelling argume argument. I want to thank you for being here. Please be aware that members of the committee have two weeks to submit questions to you, your answers will be made part of the hearing record. On behalf of the committee, thank you, the committee stands adjou adjourned. Coming up tonight on american cspan 3 of discussions of woodrow wilson. You can see that tonight beginning at 8 00 eastern. This weekend cspan city tour along with the help of our Comcast Cable partners will explore the history of eugene oregon. Go inside of the Library Archive and special election. Well look at the writing of ken kesey. After the book was published, a psychiatrist named lewis barlett red the boad the book. Then mark whalan exploring africanamerican cultures during the world war i. In terms of the effects of the world and how americans thought of war relations. I really think it did. On sunday, American History tv, the story of abigail scott. She describes in her diary of landscapes and sceneries. Shes a really good writer. That served her well later on in her career in the south movement. Hear about wayne morris. He was a man of high principle and if you did not have the same levels of principles and integrity he did, he would be vocal about that. He stood his ground and he would not compromise some time. At times people were, trying to move him along or became frustrated in dealing with him. In the end, hes so well known for his integrity. Watch cspan cities tour of eugene, or, and sunday at 2 00 p. M. On American History tv on cspan 3. Working with our cable affiliates and visiting cities across the country. Sunday on q a. There is a political structure, primary actor and secretary commerce and those rules still govern the way we actually allowed resources to be used in our economy today. Clemson university professor, thomas hayes talks about his