Hours. The committee will come to order. Good morning and thank you all for joining us. Today our committees focus on the top priority for the American People, progrowth tax reform that will create jobs, increase paychecks and strengthen our nations economy. America now has one of the most costly, unfair and uncompetitive tax systems in the world. The need for progrowth tax reform is urgent. Todays high tax rates on american businesses drive good paying jobs overseas and makes it much more difficult for our job traders and our 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, favored treatment to Washington Special interests while millions of harvard 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 jobs and paychecks nationwide and hes calling for the house and the senate to put forward our best ideas. Our committee is ready to answer that call. For the past several years weve held roughly 40 full committee and subCommittee Hearings on all aspect of tax reform. All of our members know that tax reform is an economic impairity. Now is the time to go bold. Now is the time to deliver real results to the American People. We welcome all Serious Solutions that would help achieve that goal. While theres no perfect way to tax, there of there are Proven Solutions to help americans grow their lives, especially the middle class. We have the highest Corporate Tax rate in the developed world at 35 . For Small Businesses the rates can be as high as 44. 6 . To unclaesh job creation, increase middle class paychecks, we know these rates have to come down. Americans must take more so they can invest more in their their business and futures. We also know that expenses is encredibly good for jobs, our paychecks as a whole. This provision loan allowing businesses of all sizes to immediately write off their Business Investment, will grow the economy over 5 over the next decade, create 1 million fulltime job and raise wages and paychecks significantly. Finally, the numbers show us that businesses of all size are recently the business round theyll prompt companies to increase Business Investment and three out of four said they would increase hiring. This made clear that tax reform will create jobs, create paychecks and grow our dmi 90 of the o said that laying tax reform by closing slower growth, dloer high it would force the americans to continue to work with a tax code that is against them, not for them. Roger, who is a friend and his wife, who are so deeply involved in the community said as a Small Business owner, im scared to death each year on how im going to have to pay into the government. That uncertainty is devastating, he says. Its kind of like trying to operate your business with one hand beified behind why are back. Sometimes you feel like both hands are tied behind your back. All Small Businesses know that feeling. Well hear from real live Business Leaders about exactly what is needed to get jobs, paychecks and the economy. 80,000 middle class workers. Their expertise will help us understand how different pro owes als will create weve received thousands of comments fr that we take very seriously. We look forward to the expert guidance our experts will bring to you today. 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 idea into action. Ill now recognize Ranking Member neil for his portion. Thank you. We all agree the tax code is broken. Its far too complicated and in in need of repair. We all agree any revisions should promote Economic Growth and create jobs for working families. However, we should reject ideology and Work Together to reform our tax system for the 24th cent. According to a recent poou study, its shifted middle to upper income household. 49 went to the upper income household in 2014, up from 29 in 1970. And more fiddle income pous holtz was 47 in. Well, is now concentrated at the top and i assume theres broad agreement on that issue. Not to miss the point, greater concentrated wealth at the top is a reality as we proceed to this discussion. Income stagnation is a real challenge and one that needs to be addressed in tax reform. This is why working families sen they were concerned about unearn financial stability. Tax reform should be about moving the dial to help middle class families prosper. And helping family with day day kouss like housing i urs flb and naenchs our focus should be pb. That is not the case in too many houses across the country today. Middle class is actually the true winner in any tax reform proposal. Americans believe massive tax cuts will grow the economy. The American Family knows that tax reform that provides middle class tax relief and askS Corporations and the wealthiest americans to pay their share is what will grow our economy. We will oppose any tax plan that simply 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. I hope the secretary will move back to the test set out by senator mnuchin for tax reform. Furthermore, tax reform make no mistake, tax cuts do not pay for themselves and anything to the contrary is a nonstarter. I would argue the importance of considering the Macro Economic effects of other policy changes, including an acknowledgement that robust changes would have a significant effect in our economy. I think we should use the revenue for the deemed repatriation and for other investment purposes. In conclusion we have a unique opportunity to sit down and work to the on tax reform. After all, we all agree that the Current System is inefficient and under pro dubt productiv. Only if we do make the effort to assist the middle class. We look forward to hearing from our witnesses as they join us today and look forward to a continued and productive conversation. Thank you, mr. Neil. John stevens is Senior Executive Vice President of at t inc. , zach model is the chief alignment officer at atlas tool works, david farmer is ceo of Emerson Electric, Douglas Peterson is president of snp global and Steve Chatman is the president of will advisers llc. We reserve five minutes to deliver your oral remarks. Mr. Stevens, well begin with you. Thank you for being here. Thank you, chairman brady and members of the committee. I appreciate the opportunity to be in front of you today. John stephens, chief finance officer of at t and i sincerely appreciate the opportunity to discuss the importance of comprehensive Corporate Tax reform with you today. At t is a company with 140year heritage of research and innovation that includes eight nobel prizes and more than 15,000 patents and pending patents worldwide. We employ more than 200,000 people here in the united sta s states, and over the past five years, weve invested more in the economy than any other country, at 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 and making more money. However, private Sector Investment in the u. S. Measured as a percentage of gdp is at ielts 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, then we must get serious about jump starting private Sector Investment and the best way to do that is to fix our broken last kent the most effective catalyst available for Public Policy makers to increase Capital Investment, create jobs andin ps also narks we can respond to Foreign Countries that have implemented modern technology to aggressively compete for our job and our investment. We have a once in a Generation Opportunity to comprehensively update the code for the 1st century and put the u. S. Back on top. First, we need to reduce the top Corporate Tax rate. This is the quickes, most straight forward way to scum start investment in our country. It will bring our tax system in loon with other developed countries by reducing the rate, simple economics will drive companies to invest more in america, the tax founds estimated this. It removes the negative effects of taxation on investment. And we know it works. This committee allowed accelerated depreesh yags that positively affected our Investment Decisions in those years. Plane and simple, we at at t invooess upon prn it would do even more and more investment directionly means more jobs. Sflrnls any plan being considered should be judged in totality, not just a sijle provision. For example, one area i know the community has looked at is eliminating interest expense deductibility. Viewed in eye lags, that would be very problematic for me but i understand it necessary as part of a broader communication. If they interthis would not only give companies appropriate time to adjust their Capital Structures to the new system but also allow them to immediately increase their investment in response to a lower overall tax rate. Mr. Stevens, thank you for your testimony. Mr. Chairman and numg f id here today representing not only my own company but also the 750 manufacturers who are members of the technology and factory association, illinois in snarnl most are like mine, small to media sized whether through innovation, modernization and cost control, we now produce more product than we did 20 years ago. Plus were well positioned to take on the challenges of reshoring and were proud to help manufacture the weather of america. However, in order to kin our success and im here today to testify in support of who are workto come sfb. The community for trade competitiveness through tax reform and the frrnlt sfrchl to throw at theinternationally kpchl andsffrmt and this also compares the be be prks snrks knorrly every one of our trading colors current nrnl snrm snrmt they act as terror and subsidy repli into the e. They. They raised the nchlgs n but any dri nfrm and used the protest to produce or snechlgt they go hand in and. Iin nichl. One that encourages domestic fn we dod n and we dont need to risk having a trade stwrrmt sffrmt sfrnlt. Its the importance. Were often family owned, we usually own our own real estate and weep do not have a significant staff of tax experts. We work hard to ecompetitive, work hard and pay our fair share. Small businesses see sof the worst tax resources under the globe. Thats why i believe we must reduce the overall rate, offer a reduction in payroll taxes and fund these reduction through bats. It also important to simply ties the subcode. Tripe, sfrrks snrnl they have three different tax structures. You so you remember companies lick mine and tens and thoughs throughout the United States were to the look for a, in if are all rear going for from congress to a move toward a n this oo for flrmt sfrnlts and frchlt thank you for the opportunity to provide this input. I look forward to your if hes. Thank you. Mr. Farr, youre recognized and welcome. Thank you very much. Good morning, chairman brady, Ranking Member kneel and dwibd members of the committee. Thank you for this opportunity to stay with you. Im david chairman and ero of emerson and prchl well have over 80 thousand and operations in more than 1350 questions. The nationals largest industrial pro sp sfrchgs . Because as a matter of fact hooves snchl snchl. And a snchgts manufactures are in the u. S. Have innovated but the snrks with a combined sfruchlgt and this is a competitive problem. And top rates as manufactures organized, the top rarity frnl paid 1. 8 billion ally in taxes worldwide. More than half of that was paid to the United States. A marginal tax rate over 37 , emerson pays real tax cashes here in the United States. The key objective shared by emerson is a top federal telecommunication rate sfrashl, if lowering rates will make us more competitive and promote job creation and strong are Economic Growth. Outdated and cumbersome car rools represents another major problem. Emersons business is glo globe frifrm as a u. S. Company headquartered in st. Louis, missouri, emerson typically pays more in taxes on worldwide earnings than our foreign competitors. This is another issue. Most Countries Companies pay little or no tax when they bring their foreign earnings back home. The United States, on the other hand, has a world wide system meaning Global Companies where they do business, they pay taxes as well as in the United States when we bring the earnings back home. This out of tax burden is a significant disadvantage when u. S. Companies are competing for global business. This will increase u. S. Jobs, exports and allow for a flow of capital back the United States for investment right here in america, a tax plan must encourage Capital Investment by allowing accelerated appreciation of newly invested assets, one of the most important being the full expensing the first year. Opinionsi expensing lowers the cost of capital and economic adjustment and job growth. I strongly support a robust r d incentive. U. S. Manufacturing would want the United States to be the best place to compete in the manufacturing world. Permanent tax reform that reduces the Corporate Tax rate to 15 , provides lower tax rates lieu pas for passthrough entities will ensure we achieve this goal. And improve our countrys competitiveness. We need a fiercely competitive tax system and we need it now. Were committed to working with you to advance this muchneeded tax reform as soon as possible. Mr. Chairman and committee members, thank you very much for having me here today. I look forward to the q a. Thank you, mr. Far. Mr. Peterson, welcome and youre recognized. Chairman brady, thank you for inviting me to speak. Im grateful to share my perspective of how tax reform can help all markets. Im doug peterson. Our commitment to transparency and intrigue tegrity beginni the expansion of the Nations Railway system to the growth of Digital Information technology, s p globals essential intelligence has remained independent and guided important decisions 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 my continued support as you move through the legislative process. My message today is twofold. First, we need to reform the u. S. Tax system, including lowering the Corporate Tax rate and putting together a more Competitive International system. Second, we need a permanent, comprehensive fix that will promote aggression, and growth to support American Companies and works are. We pay a large majority of our taxes in the u. S. Since the u. S. Has the highest Corporate Tax rate among the countries at 35 , we have much higher ekt. Canada has dropped its corporate rate from 36 to 26 and the United Kingdom will have a rate while many of our competitors pay in the low teens, this high rate hurts our with a less Competitive International system, u. S. Companies face an uphill battle. Currently when Foreign Companies establish a system they pay little if any tax here. Foreign Companies May pay little to no Corporate Tax when they return home. In contrast, u. S. Businesses are taxed fully in the u. S. And more than 2. 5 trillion in profits from u. S. Companies is offshore today, something that doesnt happen under other tax systems. The basis of our tax zone was designed after world war ii. The last rewrite occurred before the internet. The emergence of technology, advanced motor vehicanufacturin agriculture and global sags izaf our markets are all new features of our economy. The tax inequities that advantage foreign competitors can be traced to this antiquated code. Its time for a change. For decades United States has been the birth place of innovation and new business formation. We should use this for come hence of tax reform to ensure it continues to be the engine of startups. Today we are losing ground and we should be leading. I Hope Congress will seize this moment and enact substantial changes that will foster investment and growth in the u. S. Thank you for allowing me to provide this testimony. Thank you, mr. Peterson. Thank you mr. Chairman and Ranking Member neal for having me today. Ive spent 35 years in the private sector as an investment manager, meeting with companies, analyzing with companies, investing with companies and having spent time in the treasury with the Obama Administration. I would concur with what every previous speaker has said about the need of come hnsiprehensive reform after years of neglect. Any tax legislation should be deficit neutral, second, it should be fair and certainly not diminish the progressivity of our system, it should improve our International Competitive position. On that basis the proposal of the administration falls short on several aspects. Its net cost could be 5 million to 6 trillion over the next decade. I would note that the deficit is already rising again. These projected deficits would be substantially exacerbated by the trump plan. The committee for a responsible budget the trump plan would drive this to an astounding 111 by 2027, even as we continue to deal with the effects of an aging population. To count are these concerns, the President Trump administration seems to say that faster Economic Growth will quickly close the gap. Thats not what happened at the end of reagan 91. Nor is it our experience following the tax cuts pushed through by george w. Bush in 2001 and 2003. To pay for the trump plan, we would need average growth of 4. 5 a year. For its part, the Nonpartisan Congressional Budget Office projects approximately 2 growth for the next decade. Treasury secretary Stephen Mnuchin believes in 3 growth from the president s plan. It is far short of what is needed. Given the economic strains on middle and working class americans, it is critical any tax reform plan be focused on helping these americans. The details of the trump plan contradict the assertions that there would be no tax cut for the rich. Yes, some deductions are to be eliminated, most notably for state and local taxes but when the trump provides enough information for the experts to score the proposal, i have no doubt the rich will be big winners. Gary cohn has argued that mr. Trumps plan is a middle class tax cut. Regarding growth and investment, while large tax cuts to be viewed as enhancing shortterm growth, lack of progressivity will overwhelm benefits and squeeze out private investment. The Tax Policy Center has estimated his plan will reduce gdp by half a percent after decade and 4 after two. Fourthly, it should enhance our International Competitive position. I would agree the need for tax reform is without question. While the stated rate for u. S. Companies is 39 , many pay far less as a result of avoidance techniques and the average is 10 to 15 lower than the statuary rates. What should be done is a thorough elimination of abuse f ef abusive unweighted average. I will close by saying a co comprehensive tax bill is long overdue but needs to be fair to our middle class. Fixing our broken tax code only occurs once in a generation. Its important we do this right. The goals of the House Republicans that have developed for this once in a Generation Opportunity is, first, rather than a 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, grow paychecks and grow the u. S. Economy. And has were doing that, leap frog mrk from nearly dead last among our global competitors into that top three and keep us there. That means designing a tax code where our local businesses can compete and win anyone where in the world, especially here at home. So we are going all in on grows middle class jobs and midpatients. Lets begin with the bipartisan issue. Four 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. S that what led us, republican, go in section 179 of the Small Business expensing, its all about rewarding businesses for investing in buildings, equipment and software and technology. We want to go bolder. The house blueprint calls for a shift from an onerous business income tax to u. S. Based, simpler cash flow tax system. And at the heart of that, we would provide for a full and immediate writeoff of all that new Business Investment. And that investment, by the way, not only is the key to middle class and main street job growth, its key to making our workers more productive. Thats what drives wages, thats what drives america to the lead pack and having the strongest economy on this planet. So i want to start with our witnesses. So can you explain how having access to full and immediate writeoff of your Business Investment will lead to you invest more in growth of jobs both for you and for customers, for example, and businesses who are making those investments themselves. Mr. Stevens, well begin with you. Thank you, mr. Chairman. Very just as it has with bonus with immediate expensing we do that, we invest in research, technology and productivity. For us that means building out more broadband, more finer optics. Those provide jobs, not on the engineers who design and researchers to develop those fiveg type systems but our proud employees who built those and maintain those and theyll have better youll have a direct impact on our priority tax libls. We do pay property taxes. Does it also make your must frs psh certainly many of our people in our supply chain are Small Businesses and diverse businesses. So they would be immediately helped. It would help them generate their business. From a perspective of what most would concern large business, Small Businesses are some of our best, most wonderful customers. We wants Small Business in this country to succeed. Its good for the demand on our services. Absolutely. So this is a complementary situation, not one what is in different views. We want Small Business to have that opportunity to succeed in this environment. Thank you. And so that leads to familyowned business who both invests in your plans but customers who are buying the products as well. The ability to write off those new investments Going Forward, what does that impact. Right now were doubling the size of our plant being putting an addition right for our sales, were really investing in the future, we believe in it and that would help us continue do that that. Mr. Farr, manufacturing. If you want to stay competitive, you have to reinvest all the time. Its expensive. And your customers, theyre buying those products. So faux for the first time of history, all businesses of all sides immediately being able to wrof off from their taxes. What impact does that have . Did obviously draw as higher level of run, which gives 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 and that will drive a faster Economic Growth overall. Thank you, mr. Farr. It also illustrates the power of a simpler cash flow system. It focuses on that p mr mr. Peterson, your inits called pop other countries around the world have such loch tax rates prp they want that intellectual property overseas. These type of fchls. In the last two and a half year, we invested in large operations in sharr lotsville, texas, and new york. This would ensure wed continue to do those investments in the United States. Mr. Rattner, thank you for bringing your criteria forward on pro growth tax reform, bring those solutions are extremely helpful. From your viewpoint, you work n. C. Many clients, whether in technology, investment growth, growth that comes from that invest me investment your view on limited medium, all size Business Investment and those productive investments, what impact do you see from this provision . Thank you, mr. Chairman. First, i would certainly concur with others that the rate of investment in this country is below what it should be. When if you give somebody money to do something theyre likely to do more of it. I think the focus on this provision is excessively narrow in terms of what is affecting 1re6789 in this country when i talk to ceos and companies, sure, they might if you lower their taxes. Demand have been quite week because wages havent goon up. Theyre investing more money in other parts of the world where they see more demand. So i think the question of investment in this country has to be viewed more holistically in the context of how do we get growth here. This may be one piece but knotsth not the holy grail. Mr. Ratter in, i agree. We have to take tax reform in a kpre hennive way and put together a number of pro growth provisions but in the estimates of the house blueprint or it will raise the average aftertax wages family four by 500 helping create the demand that helps grow our economy as well. Thank you for those responses. Mr. Neal. Let me thank you for your leadership and to recognize the sublg ses of the automobile restructuring that took place during the midst of the recession. I remember having extensive conversations with individuals like mr. Levin at the time and our greatest fear twhaz if that industry collapsed the randd would have proved offshore permanently. So i think we begin by thanking you for what you were able to do to help turn around that industry and to thank you for your government service. As i noted in my opening statement, my priority for tax reform is the middle class. The middle class is contracted in the United States over the past two decades while those at the top have done better than ever before. That is knonot a statement that comes from a democratic manifesto. That is from the Peru Foundation and many think thanks across the country. Working families sent a message last november. They are frustrated by wages, theyre tired of a tax code that prefer the billing over the medium and greater concentration of wealth at the top. Theyre 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. Ratner, you agreed with the position that its critically plan be focused on middle and working families. Would you please provide us with some suggestions that you might have and i hope you will also have a chance to touch upon the need for freighter retirementing savings insent yifts for the families ive just described. Addressing income stagnation and rising income inevaluate is in america. Based on your experience wed like to hear from you. Thank you, congressman neal. I think any tax reform reform package needs to address a variety of needs. We talked in the first part about investment. Youve talked about the situation with the average american. I dont believe in response to chairman bradys comment that while there would certainly be indirect effects on average americans of investment tax benefits, i dont believe that thats the most direct way to help them. I think it is a form of trickle down. I think when you look at the tax proposal thats been made by the administration youll see that its very unbalanced. It has not yet been scored but President Trumps Campaign Proposal was forward and 83 of his tax plan would have gone to the top 20 of americans who would have gotten an average of a good 25,000 tax cut. The middle class would have gotten a thousand dollar tax cut. Thats not my view of fair and balanced. Part of the equation is to give middle class americans more of a tax cut so that they can spnld and help get our growth rate up toed the higher level. We will respect to the question of Retirement Savings, thats a whole nother subject but we have a huge problem of Retirement Savings in this country this theyve credited some benefits but theyve led to a vast amount of undersaving by americans who are facing tough time in retirement and i think we need to think about a fairly comprehensive restructuring of that whole program. Thank you. Thank you mr. Neal. Mr. Nunez, youre recognized. Thank you will be. I think id safe to that i a all of you have been expressed some level of support for mooufl to a cash flow system and one of the opportunities that we have during hearings like this, this being one of the first hearings were going to have, multiple hearings over the next few months is having folks like yourselves being able to speak before the American People here in congress but begin to talk about these switching from an accrual system to this 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 and why dont i just start with you mr. Stevens . Moving having a big company, one of the Largest Companies in the United States, the opportunity to go from the 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 can expand on that and explain some of the opportunities this will give you. Certainly simple indication of the process and the simple indication that might be required to provide some balance to comprehensive tax reform would be very helpful. We file over 250,000 tablgs filings. We have a large group of professionals. Quite flankly the provisions of the lower rate and incentive to invest in capital would be the mes effective way for us to increase our 1re6789 and through that, hire more people, generate more jobs through our supply chain, generate more research with Technology Development and quite frankly, improve the wages of our employees and of their peers who work for their companies. And as that goes through the system, it would generate demand for our service and thats the real answer for Economic Growth, as Peer Companies that are represented today from all sizes invest, they would put demand on our services. They would put demand for labor and wages and you would see growth of a significant level, we believe, for all. And then for us, it would generate on the top line. So yes, there would be simple indication. We are a Large Company. We have resources. Simple indication is more beneficial to the small and medium size businesses and theyre gentlemen important to our company because there are 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, welcome, sir. I have a district that has a roth of Small Businesses and i think having you here sitting next to one of the Largest Companies in the United States really shoals how we can get good businesses in america and Small Businesses in america to agree that moving to a cash flow system like this will be very beneficial, and so could you walk us through just kind of the opportunities that moving to this system would give a Small Business like yours . Absolutely. Thank you. Well, you pointed o the relationship here. Id like to point out at t and the Telecom Industry was one of the biggest customers of my company for a hundred years. The supply chain relationship were faulking about is so important. If my big customers are healthy and buying 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, you know, ive seen some models that maybe have a little concern for Small Businesses but i would ask you to consider maybe think about a border adjustable profit taks. Its similar to what youre talking about. Either one of the models is a great improvement. Anything that simplifies or reduces and gets my customers happy, its a great tax reform for me. Thank you. Thank you. Ive got a few seconds left. Mr. Farr. Yes. I agree, having healthy Small Business is very important. Theyre key suppliers of ours. I can redirect money from Tax Compliance from doing tax forms to engineering and new products and innovation, that will obviously grow the economy. Thats productive assets which go into growing the economy, making new products and helping america be exitive. Not saying tax lawyers arent productive but id rather making new product and we know that. Thank you very much. Yield back. 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 just a couple of months old from a chicago entity and i quote i find that the still la active effects of income tax cuts are largely driven by tax cuts for the bottom 90 and that the empirical link between employment growth and tax changing for the top 10 is weak. To negligible and even a Business Cycle frequency. Then ill continue reading. If policy makers aim to increase Economic Activity in the short to medium run, this paper strongly suggests that tax cuts for top income earners will be less effective than tax cuts for lowincome earners. Overall, the results not only suggest some skepticism for trickle down economics but they also provide evidence that supply site tax policies should do more to consider the relative ef fa si of tax cuts targeted lower in the income distribution. So i just want to mention that when we talk about comprehensiveness, just lets keep in mind whom were trying to benefit. Jobs. Theres much talk on the republican soid about the middle class. The trump proposal is the option of it. Also, i just want to make a comment to mr. Stevens. 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 dramaticcally while wages have stagnated. P 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 of years ago. And crs made clear that the efficacy of bonus depreciation depended on its being temporary. And thats why it was enacted in the first place, as a boost during a recession, so when you essentially adopt it 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 just kind of put them out there as if theyre some kind of a magic wand. The crs essentially says it is not and indeed dave camp left bonus depreciation out completely. None of you have talked about impact on the deficit and how we faye for a Corporate Tax reform. Are you concerned about this . Are you among those who say let it flow . If the deficit increases, it will essentially bring about Economic Growth . Just quickly. Theres just a minute. Rl you worried, each of you about paying for corporate and other tax reform . I can start. Certainly we are as a member of the group of companies that operate here in the United States and part of our this is our home, absolutely. Thats why in our comments we talked about tradeoffs. Ok. Comprehensive reform. Fwll tradeoffs, we understand that. Thats something we have to work through so we come out with a complete and workable package. Le. Are you concerned . Yes, mr. Representative but i want you to have their yiek your cake and eat it to. I want you to pay for the Corporate Tax cuts and give americans a boost to their paycheck. Ok. Congressman lef ip id say yes im concerned about the deficit as a individual taxpayer and a ceo. I look for tradeoffs back and forth. I think its very important. Sir. All time is expired, mr. Levin. I would point out the House Republican blueprint is designed with balances in the budget counting on Economic Growth properly measured. Mr. Teaberry, youre recognized. Thank you. Thats why ive been an advocate of 1779, making 179 expense. Bonus appreciation im not going to take the bait and get stwoun ask about that. Business investment as all of you know declined last year for the First Time Since the recovery began. Not a good sign. So before i ask my questions, i want to thank you all for sharing your experiences. One of the things that mr. Stephens and mr. Farrs testimony that instruct me as so important is underlying debate and the enany of the perfect being the good. We can pick apart any piece of this. The cost of delay is so important. How do we put a toss 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 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. Whats the cost of delaying this again, mr. Stephens . Lost wages for our working class today, its underemployment, it is Participation Rates in the work force that are historically low levels and thats and middle class workers are probably the bulk of your employees. By far the we are the largest we believe were the Largest Union employee in the country. We have over 120,000 represented workers. Were proud of them. They do great work for us. They would billion the largest bishies of the additional Capital Investment, because they are the ones who do much of that work. The cost of delay impacts the middle class worker. Absolutely. Thank you. Mr. Mottle. Delay cannot happen. We saw what happened with the markets yesterday because theyre concerned were not going to get things done here. Ive invested all that money in my business and im expecting to get a return on it and pay back the investors are my family and the bank. I need my customers to be healthy. I need it right now. Thank you for your investment in ohio, by the way. Thank you very much. Were moving bhaeld because im assuming this body will get true tax reform done in ohio. The cost of delay means lack of invasion, less new products, less jobs. Its that simple. We look at how much growths going to be and we pair it back based on delay. Every time its delayed we push that investment out. It has an impact on people, how we hire, etc. I believe well get tax reform and thats why were moving ahead in ohio, wisconsin, and texas, and missouri right now. I think this body understands for the first time in 30 years. Were betting on you. Mr. N peterson . The cost of delay is the cost of investment. The delay is to not get a lower rate and not get a territorial system were going to see more Companies Looking for some sort of inversion, not bringing their cash flow back from off shore. Recently one of the companies in our industry did an off Shore Investment with their off shore chance. We have no chance of getting any of that cash back to the United States. Dont ruin the picnic now. Im sorry . Dont ruin our picnic. Im note. Thank you. We can all agree on your question. Yol think theres any theres a lot of disagreement probably on kbhaflle we should do but i dont think any religion person could disagree that sitting where were sitting now having done nothing really in terms of tax reform has cost us millions of jobs, billions of dollars and so on. When i pick up the paper and read about another Company Moving its jobs overseas, it upsets necessity. Because i think we could be doing something about that now. I yield back. At that point we should probably thank you very much. Mr. Lewis. Thank you very much mr. Chairman. Mr. Ratter in, i want to join Ranking Member neal, thanking you for your service to our country. 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 . When will reform, tax policy should consider reforming the tax problem . 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 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 five and a half trillion dollar tax bill involving a 1,000 tax cut for the average american making 450,000 a year doesnt seem fair to me. I think there needs to be fairness. The comments on Business Investment, i understand why theyre being made, affect the supply side investment of more factors. Thats good. We also need to put more on the demand side so people can spend more and get the economy growing faster. While i do share the view that we need comprehensive tax reform i am very troubled by the proposals on tin terms of the balance of not just fairness buts will of stimulating every part of our economy, not just the 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 commer diversity of our employee and customer base. Weve been recognized for our accomplishments by many industries. We have a longstanding supplier diversity program. We spent close to sir, i appreciate that. But i dont see any africanamerican, latinos, asian american, or native american. I dont see any women here speaking up or speaking outs. For what they need, what they want. Our country is a very diverse country. Our fore fathers and our fore mothers all came to this great country in different ships, but we all in the same boat now. Band 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 recognize that our dwem colleagues on the committee have an opportunity to bring witness toss this table as well. I think its important [ crowdry action ] crowd reaction. Would you yield . Yes. The breakdown of the witnesses which is a pretty good discussion i think wed agree that the break down of the witnesses at four to one is not representative of the proportions from the two political parties. It is traditional to take this type of approach. I think its important as we talk about middle class workers, as we invite our witnesses we recognize a Diverse Group of people. Will you yield . Not at this is time. Mr. Ryker. Thank you for your testimony today. Bottom line is were trying to create a tax code. Youve all touched on it, all members of the panel that would allow job growth, create jobs increase paychecks, grow our economy, and help hard working americans. We all agree that the tax code is broken. Its too complicated. So i just i want to touch on the question that mr. Teeberry highlighted and also tie back to mr. Lewiss point if i could. Mr. Peterson, you talk about the impact of our outdated code on your business, and i just would like you to elaborate just a little bit more on what an updated code would do would mean for you and more, i think, importantly, what it would mean for your employees, for the hard working 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 more detail. We have been a company thats been 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 have their intellectual property, intellectual capital registered off shore and they pay very low taxes. When they sell those products and services into the u. S. They do not pay the same taxes on their pricks and services. Second point, new companies that are being with 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 off shore. Immediately, they set up employees off shore, a Service Center in dublin or luxembourg or singapore, they own their intellectual property off shore and sell it back to the United States and dont pay taxes on it because the roiltsds go back to an off shore billings. For americans today that are watching, how is this going to help them . What it means for americans today is if we reform this tax we will invest more in the United States. What does that mean for the American Worker, investing more here in the United States . We will create more jobs. Are they going to be higher paid jobs . Juror there are all kinds of jobs, jobs all the way from lower end jobs. We need people at all different levels. These are not jobs just for white americans, white older male americans . Jobs for people all over the country. Diverse americans, every american citizen, every american whos working in this country will benefit from this tax code, is that correct . Every american you gentlemen every american be good for all hard working americans, correct . This is good for all hard working americans. We have to build facilities, get organized in that regional section. We hire all types of workers and its a great benefit for the entire spectrum of u. S. Workers. Great. All of you agree . Mr. Farr. Liked follow up on your comments about the importance of tax reform as it relates to u. S. Competitiveness and Economic Growth. In your view, and i know weve had lower corporate rates permanent territorial simplified while expensive comprehensive. What is, in your opinion, the west thing that we can do, the most important thing that 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 the lower tax rate. I think its very important to have the lower tax rate. That will help all employees. Weve increased wages year by year by year but weve lost higher tax benefits, so thats 20 seconds, the importance of permanent nance . Permanent nance is critical. I make decisions over three, five, and ten years. Its not by a quarter, its a 10year horizon. We need to help americans keep their jobs, dont we . Thats right. Thank you. I yield back. Mr. Doggett. Thank you to our witnesses. This is an important time in history. Our national has jep diedsed. So many have remained silent about it. Hopefully the employment of a special counsel is the first step to seeking juflt and insuring 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 travities. Some see trump as the only ticket to tax breaks and theyre willing to pay almost any price to get them. Today is also note worthy as the First Time Ever after almost an entire year that anyone has come forward in a public hearing 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 work force where there are growing work force shortages in education and in 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. Some of those are programs that President Trump proposes to cut and the rest are the ones hes never gotten around to making a proposal on. Of course, the best way to grow our economy at the least cost is comprehensive Immigration Reform according to economists and business groups across the spectrum. But that doesnt fit the ideological structure of this administration. As for tax policies . Well, i parentally our tax code is outside dated, its full of 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 if they pay less or no taxes, every time they invest a dollar at home, theyll begin investing more at home. While i question the logic of that, i think they offer many valuable insights, a number of which i agree with. I think that we need a tax policy that encourages jobs at home and when the chairman of our committee tells us there are proven ways to grow our economy, i think what these hearings have to be about is 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 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, we lower the tax rate into the 20 percent ill, 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 an 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 mnuchin promised that there would be no absolute tax cut for the upper class, but the one page i guess its shorter than a grocery list thats been presented more recently by mr. Mnuchin is chock full for candy for those at top. One analysis of it suggest that the top 400 taxpayers will get 15 million each. We need to be working on a comprehensive tax reform that provides benefits to the middle class and that does not raise the national debt. The committee has said thats their position. That has not been mr. Trumps position and coming together on that will be critical as we move forward. All time is ex pierld. Thank you. Youre recognized. My friend from texas just argued essentially that we needed a lower tax rate and then implicitly criticized the people coming advocating for a lower tax rate but i digress. Theres an old phrase that says when the bulls fight, the grass looses are. So who loses as we auddither un the tax code. The wealthy are not suffering. Theyre doing well. Its the folks at the lower end of the economic spectrum who suffer if we wring our hands and lose the 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. Wa we want is a tax code that mr. Lewis can celebrate when he says lets get it right. Ok. 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. Model and mr. Farr mentioned in your testimony and im interested in exploring this what is the value of permanentance . Whats the value of permanentance . 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 permanent nance. All of you have been ex postsed in terms of marketplaces and so forth. So mr. Stevens, 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 wefd these tax extenders and temporary policy that fade off in 24, 36, 48, pick it, number of months. What is the value to you and further down the line because you told mr. Richert what happens down completely throughout the whole chain how important is permanentance . You got a minute on it . Permanent nance is extremely important. The ability to look at that is as m. Farr said a quarter or a year but looking at three and five and ten yoish plans particularly in a company that provide benefits over literally over decades. So having that ability of permanent nance, knowing what the rules are. Tell us what the rules are and we will abide by 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 definite its a cycle that continues to repeat itself as they come back and buy more mobile services. Thank you. As they buy more thank you. It is very important tovp consistency and permanent nance with regard to the i cant speak enough about permanent nance. Businesses vote with their feel. You have to answer to their constituents. The business doesnt vote. It just leaves and takes its jobs. You talk about the successive businesses. Ive been fighting for my life, my businesses, for decades. I get one industry figured out and we figure it out and they leave. I have to find another and another. Its been a tough battle. I think a permanent tax code is so important. Mr. Farr what would it mean for you and Emerson Electric if this congress were to give a tax code that you could rely on beyond a decade . Means a lot to us. The new facility in ohio, the replacement facility is in thing six. Its going to last for 20 or 30 years. I have the world to invest in and i have a choice to look at. Who offers the best incentives, who gives the most consistent tax rates. I look at this. If you do a shortterm one time accelerated depreciation impact you have one year surge and it dies. That is not a longterm strategy and thats why from my perspective i needed to think about two, three, four years. Im thinking about camera investments right now three years out and where an i going to put that money, where am i going to build the next facility . Thats why i need a permanent tax rate and i need it for ten years. Mr. Peterson. Certainty reduces risk. Mr. Are atner. I agree. Jooch amen to that. I yield back. You got in under the wire. Well done. Mr. Thompson, youre recognized. Thanks to all the witnesses for being here. Im glad that were looking at doing comprehensive tax reform. I hit the 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. Thats what this bill needs to be, not simply a tax cut bill. 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. 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. I think its important that its bipartisan. Big things that happen in congress arent good unless theyre bipartisan. Weve all experienced what happens when we try and do it some other way. 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. Then i added one bullet to my notes when i heard you, mr. Mottle, speak, and your mention that the desire to lower payroll tax, i wrote down that it shouldnt hurt the middle class. The payroll tax is how we finance Social Security. Unless youve got some way or the committee has some way to ensure that Social Security stays strong, if we do tax reform that takes away the funding for Social Security, that hurts all of our constituents and i would hope 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 referenced a recent study 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. 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 especially on some of the numbers 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 that arent paid for dont generate this panacea that some think that it does. We know from the 80s. We know from the early 2000s and we know whats happening right now in kansas. The tax cuts dont automatically pay for themselves an we have to recognize this. Mr. Ratner, i have a question. Can you explain how these large increase toss the debt, even for policy that we might otherwise all agree is good policy can become a drag on the economy as a whole . Sure. There have been many studies of this that been done. As the side of the federal debt goes up and the interest burden goes up and the crowding out of private capital occurs because sw rates rise as the federal government borrows more and more, ail of that is absolutely a drag on Economic Growth in this country. It seems like the whole panel agrees that a whatever this committee does on taxes needs to take account of its impact on the deficit. Thats i have a little bit of a problem with what im hearing because i larry wed like to do this, this, and this but i havent heard how were going to pay for all that. The second thing i was struck by congressman doggetts comment. I think were looking at this a little bit in isolation. As i said in opening remarks, if you cut depreciation there will be more investment. How much more, we dont know. Will it be enough to pay for it or will it justify it . We dont know. We also really need to think about this compared to other ways we could spend this money. Would it be better spent on infrastructure or job training or education . Because the amount of money the federal government has for any of these things is limited and we need to spend it effectively and look at it across the entire continuum. Can you explain, if we cut taxes for the rich and cornings and we pay for that by adding to the national debt, what does that mean folt middle class families that we represent . First of all, youll billion giving a benefit to the upper class and business and very little to the middle class. Secondly we do 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 didnt control. Le. It would cost them money. Thank you. It will cost them mountain. All time is expired. I want to thank our witnesses. All of us have a diverse wrack ground that come on this committee. I was in business for 30 years, built two pretty good sized companies. I did want to touch on tsh i think we all agree we need to be more competitive on the corporate rate. I want to focus on passthrough entities and make sure they dont get lost in the mix. Id vr ive got a bill that would like to see close to corporate parity. On pass through its high as 44. California, another 12 or 14 it could be 57 . 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 them down to extra near the corporate rate. I dont necessarily agree with 15 but the difference that would make in terms of growth, in terms of jobs, and also in terms of raising wages, so ill start with the gentleman mr. Model. The pass through issue is big. I think a lot of them are paying around 44 , so if we go to 20, 25, you know, i think its just important that it gets lower and closer to the corporate rate that theyre more similar and not so penalizing to the Small Business. On jobs, the more we can invest, the more we can grow, the more we can hire. Im involved in Training Programs, bringing people out of the iner city, training them for good jobs. We need this growth and we need this opportunity. If you do the tax reform, i think youll see that. One of the things thats always concerning to me, a lot of people think youve got 150 people employees, you happen to make 800,000. The owners might take 150 out. The majority goes in to grow and expand the business. Mr. Farr, you represent a large industry, a lot of these entities are passthrough entities, subchapter s, llcs. Whats your thought about them keeping more of what they earn in the business . We have 30,000 people in the United States across all the states both democrat, republican, plants everywhere. Were very Small Business oriented and we use Small Businesses to supply to us. If they dont have the money to invest, theyre not going to have the most productive equipment and theyll lose businesses. The Small Business tax rate needs to come closer to the Corporate Tax rates so they have more money to invest as we grow. Thats been one of the biggest issues. They have not had the money to invest to keep up with us so were looking for other people to supply us and thats a big issue nears people. I want to agree that make a comment that we employ not only high priced people, we employ low priced people. All levels. In the state of florida, think think 93 of the enterprises are mass through type entities. Mr. Stephens, would you like to add to that . I think the gettiveness issue applies across the board. High tax rates gives less competitive, gives them less opportunity to invest or make more jobs. All that is good for the overall economy. For a Large Company its good for the Small Business vendors and suppliers to be healthy. Theres something out in the last ten years, lately weve got more businesses closing than opening. Weave got to have a tax code that doesnt penalize people. If you disagree with it, my thought is it can be up to 44 for a lot of passthroughs. If you put state tax, its a big number. Whats your thoughts . Respectfully, i beg a couple other points. 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, they could have welcome subchapter C Corporations but they felt this was van tables. Secondly, while the number by number, the passthroughs are vastly Small Businesses, in terms of where the income is generated ive seen studies that between 40 and 50 of the income is generated by Large Businesses or very wealthy individuals. I can tell you that i have in friends in the Hedge Fund World and Investment Management world who structure passthroughs for reasons i said and they do not need a tax cut or deserve one. While im sim fa thetic to the genuine passthroughs. I think the devil will be in the detail of structuring something to help the people who need help instead of benefitting a lot of rich people. Thank you. It makes these businesses more attractive from the credit point of view. Its critical. That kind of cash being able and capital in the business helps that very much as well. Thank you. I yield back. Thank you. Mr. Larsson youre recognized. Thank you mr. Chairman. I want to thank all the witnesses as well for your expert testimony. Adds home run as rich neal has spoken were concerned about what happens in if middle class. As if chairman points out, this is an generational opportunity for all of us. As 34r6r789 roscum said, so we want to make sure that we get this right. The last time generationally we took this up, if you look in the audience, it was labeled by one author, the battle at gucci gulch. We dont want to see a rurnl to that. So my first question i have two relates to all of you. And thats a commitment. Our most recent history in the kbheet respect to a major reform had to deal with health care and we believe on this side strongly that we need to return to regular order and that we need to have witnesses like you and and open process throughout where both sides actually participate in the drafting. Because i think as many people have pointed out about 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 this should end up in some closed door process . Its a pretty easy answer. Mr. Stephens well start with you. My expertise is in taxes and financial matters, so 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 every one appreciates open ideas. Dont you think we need more of that . Ings going on today. Mr. Mottle . More information is always better. Thank you very much. Mr. Farr. I like more dialogue. Hopefully i dont have to be hare ased. Hopefully you dont consider this harassments. Its special love. I think getting more and more data and an littics out is critical. How you do that is more valuable. Mr. Ratner let me give you a special thanks but your charts and graphs which have been very illustrative in town halls i have had. In your arguments i anticipate you would agree about the openness you mentioned three things that one of them you talked about how excessively narrow this proposal was and if you could elaborate on that. The other was you said the need for this to be more holistic and in as in the embrace with a number of the questions from mr. Lewis to mr. Thompson about making sure that this is the code has got to be more distributionally neutral. Thank you congressman. Yeah, i think those three points are all interrelated in the sense that i think that we simply focus on one or two provisions affecting business as the center piece of tax reform is excessively narrow and as i said a few minutes ago i think that the committee should be i think having more hargs would be great and to congressman lewiss point, hearing from a wider variety of people would be great. We may not agree on everything but were all businessmen. There are other people who will have useful views as you think about this. I think you do have to i think each of those 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 that are 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, the tax code, the disensentives and the fairness issues. Thats why you said in its current form its excessively narrow. Yes. Any thoughts i dmenld chairman and i know people on the other side of the aisle want to get to this. Theres broad agreement. I think and we had great precedence set by dave camp, which i know people on both sides of the aisle admire his work. I think if were b able to sit down in that manner and this exchange of ideas and providing as much love as mr. Farr would like that we are able to reality an opportunity to move the country forward. Thank you. All time is expired. Mr. Smith youre recognized. Thank you to our witnesses and thank you mr. Chairman. I think this is an important discussion, important conversation that we have. I appreciate the perspectives that you bring, multiple perspectives, i will add. Its i think this panel represents multiple perspectives as well. I think that as we sift through this, i hear from nebraskans as a representative of rural and remote nebraska, theres a frustration that perhaps just waiting and to 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 a consensus that our country is uncompetitive in the world as it relates to our tax policy. I think it is very important that we come to that realization and move on it. In a permanent way as weve already heard. I 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, if you narrow that down top few enough people, then that makes it fair. I disagree with that. There will still be people harmed, individuals harmed, certainly Family Businesses harmed, and up think Family Business is particularly in agriculture that are not awash in cash and licked wliquid . Itself. I think if we focus enough on doing the right thing for the right reasons, we can get this done. But i can tell you it can frustrate me when i hear various arguments of why not to do it in a 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 that weve had over time have been instructive. I speak personally on that front of how instructive that was to hear people out. And variousing sectors of our economy. So im anxious to move forward here. And hi think that this time and this conversation is important. Im wondering if our panelists could perhaps explain to me i know that emerson points to ohio for some expansions. We have facilities in nebraska, not in my district that arent 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 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 instead of the chamber of commerce in dallas. What were seeing is an extensive number of businesses moving in to texas because of the favorable income tax rate compared to other states. So what we are talking about here is happening every day among stg 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 woe 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 of the you do tax reform, if you do it within the u. S. Well bring business back to the u. S. , all states. Theres a comment about switching our tax structure. I would love to do that. It would trigger a huge tax. To do dont have. There was a comment made, 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 infratrukt structure 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 innovative people in the world. We have a rule of law and an energy boom which attracts many new cops 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 repatriation can be sweetened by maybe moving that back into our woefully inadequate infrastructure spending. Theres admittedly a little disagreement about repatriated 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 invest in infrastructure. I think those three things around regulation, 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 to allow our infrastructure to deteriorate. Mr. Chairman, i appreciate your courtesy having this hearing. I appreciate our panelists raising important issues. I would respectfully suggest that the committee think about a simple subject that we could deal with. Have three or four days of listening to experts who are in local government, state government, the various industries, hear from 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 jumpstart the economy and that would ease some of the 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 did tax 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 fairer tax system that allows you to grow your business . Thank you for that question. I couldnt appreciate it more. You know, like i said, the reason we have those complex structures and, yes, in some cases it works for us in other cases its hindering us and i cannot change it. Ive inherited this. Were a 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 we taxing 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. Excellent, thank you. I think its been reported that american businesses spend about 3 billion hours and 150 billion complying with this outdated burdensome tax code thats on the books. Could each of you just comment quickly about the cost 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 about 240 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. Levins question about whether you think its important for us if we do take a run at comprehensive reform we do is it in a fiscally responsible manner we look at expenditures we can close down to help pay for a simplification and lowering of 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, not 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. Thats how you pay for it. 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. Since im running out of time. One way of building by partisan one way of building bipartisan support is tying 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 infrastructure 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 repatriation in the past. We have a ton of money parked overseas not being utilized for used efficiently. One of the ideas that weve been focusing having a fixed rate deemed repatriation, dedicated for infrastructure as part of the revenue stream that we need to get going on this. Do you have any opinion about that . Sure. I have not been the biggest fan of repatriation because the evidence doesnt suggest it would make much of a difference. We tried it in 2004. It didnt really make a difference. Theres a lot of cash on companies Balance Sheets theyre not investing. But in return for getting critical money for infrastructure, i would support the deemed repatriation or actual repatriation tax if that money were channeled for useful purpose, simply to get going on the infrastructure issues. Mr. Farr. The reason why they didnt have much impact is it was a onetime impact. 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. I agree. My perspective is to have that money here is a good thing. Hopefully well end up at the end of this process with a much more simplified, more competitive tax code but also fair for working families, for Small Businesses, family farmers back home too. And thats the goal at least, mr. Chairman. 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 world, 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 letter i received from mcdonalds, a Small Business owner in loretta, minnesota, who writing 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, having permanent reforms to plow more money into their paychecks and investments and higher wages. So mr. Stephens, you had mentioned right off the bat, this is about unleashing Economic Growth. A key investment. Mr. 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 to 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 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 buns. The purpose of those businesses is to make the buns 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 invest in making more buns, making more parts, hopefully apz as an offset, 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 investing right now in shockapee and moving jobs. 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 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 my 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 recognized. Thank you, mr. Chairman. I appreciate the witnesses being here today. Mr. Stephens, 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. Stephens. 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. Mottl. 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. We all understand the political calendar. This is the beginning of a 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 all 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 do 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 interests 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 innovative. 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 and 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 employees to 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 actually 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 define 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 Generation right now. I want to see it go to a fourth generation. I dont know if we can. Im with you, were a c corp. , not an s corp. As we look at all those things it better be pro growth. I am just really concerned as a country thats going to have record ref view 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 when president obama left, it was almost 20 trillion so the concern with that is immeasurable. 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. Its foolish to think we can do this on our own. 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. Its because 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 at that time. It was a matter of the world was upside down. So anything that you disagree with what were doing or attempting to do because we all agree that youre healthy, the countrys healthy. Youre able to hire people, youre able to 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 you 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 in america and i live in st. Louis, missouri. Perfect. Yes, mr. Stephens. Or mr. Mottl, doesnt matter. Youre all doing the same thing. Congressman, only thing i would add is only thing id add is urgency is important and lets not let perfect be the enemy of the good. We are willing to make tradeoffs. We understand that there are tradeoffs to be made that this is there are multiple interests that have to be accounted for. We all accept that. Please, with urgency, dont let the perfect be the enemy of the good. Thank you. One quick thing, you know, just how important it is to make this easy for Small Business. And you clearly get that. But, 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, getting 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 tell you, 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 get into that right now although we are but i am going to say this, im reclaiming my time. Thank you all for being here and this 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. 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 doesnt 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 failed 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 aging 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 good for a thoughtful and robust discussion about how tax reform should move forward in a way that is fair. Ive often said that our tax code reflects our priorities as a country, and we need to create an environment for goodpaying jobs to flourish and allow families to be able to save and have some financial security. You want to talk about uncertainty, Many American families face an existential uncertainty from day to day, which is very different than 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. All 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. Rattner, i also have to say that the only reason im here is my profitable business, my car dealership, one of them was taken 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 about, 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 write off 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 any more 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 hardworking american that needs to be talked about, as well. And by the way, 34 years ago that was me. I started my First Business with nothing. I was a hardworking, middle class person, barely making ends meet, but i was able to live the american dream, and the tax code did get in the way. So the good thing about today is, i heard agreement from everyone. Heres the things i heard agreement on. We need to lower taxes. We need a territorial system. We need to make sure the u. S. Is more competitive, 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 the 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 it, and it change the way you collect it. Mr. Stephens. 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 one 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. O. 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 jurisdiction tax cut, but both our companies and our citizens have a competitive disadvantage on a global stage. Its pretty remarkable if you think about it. So mr. Peterson, youre the ceo of a company with global operations. Could you give me a firsthand perspective on 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 examplesch in my testimony i mention we pay a tax rate well over 30 and we have competitors pay in the teens matter of principle we have a competitor based in canada that operates globally. Theres another one of our competitors that did an inversion and moved their operations from the United Kingdom and went from a 30 tax rate to 12 tax rate. In addition to that i mentioned offshore Companies Moving their offshore cash into International Acquisitions overseas. They pay at the 12 , 15 rates. This is a situation where we feel every time we go out were competing in the markets. Every time we try to hire americans in other markets, they have a tax advantage, obviously. We pay our employees the same rates, which means for us its also an increased cost. We would like to have the same net income, and that means also their paying for tax assistance over seas. So there is an additional burden when we move them overseas. I have a friend who works in mergers and acquisitions, they were buying a company in hong kong and they were looking at moving usa citizens to hong kong to work at this company. And my friend was telling me 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 United Kingdom, australia, singapore, or hong kong. Theres always going oo be a cost deferential. I did this. I got paid 120,000 a year. It cost the company 125,000 a year to have me work in hong kong. Often we go there and we dont see americans there, but well see british there or new zealanders there or ostrillions there as executives in u. S. Companies based over seas. So i think when we address the territorial system, we need to address our citizens are treated as well to 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. Sule, youre recognized. Thank you, mr. Chairman. I want to thank all of our guests today. Im a new members of the house ways committee, and i can tell you im really excited 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 administrationss plan doesnt seem to be a product of collaborative work. I think its really important, and you heard us echo this a couple of times, and knoll our chairman is listening and i know he, too, understand the value of collaborative work. We all want this tax reform boo be truly lasting and not just a oneoff. Every day im honored to represent my home district of alabama. The Median Income in my district for a family of four is 48,000. 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 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 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 that i know this president will sign into law the most consequential tax cut in american history. It cant just be another tax cut, gentleman. It needs to truly be another tax cut reform. I know folks 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 i think we have to try to figure out a way to make this work. So my question is we talked about how any tax reform is deficit neutral. Id like to talk about how we can make it distributionally neutral as well. Can you talk about more sort of supply side economics, which you said like trickle down economics, doesnt try to trickle down to the middle class into the working class. So can you talk about making sure any kind of comprehensive tax reform we consider is also distributionally . Sure. First of all, i agree it needs to be comprehensive tax reform not just tax cuts. 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 certainly thats a step in the right drekds, and we should commend him for doing that. 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. 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 americans . And its just making adjustments to those formulas. Its just something we need to do. I believe our tax cuts should incentivize the type of behavior we want to see. I know that the rural parts of my district are quite scary, so incentivizing work force programs and Work Force Development and Work Force Training is important. Can you discuss the role tax reform can play in helping Companies Like emerson promote Work Force Development . For sure. First of all, you have to know im a 9 iron from ferguson, and we put 20 million into ferguson including programs for the high school kids. I find businesses do this, and we want to help our communities. So i think youll quickly find out that businesses if they are really engaged in the community, will do it. And i do this lively, and ill tell you ferguson is much busier today than it was 20 years ago. Thank you, mr. Chairman. When we all sit down here, we all have questions we want to ask. And this is to all my brothers and sisters sitting up here on the dis. Maybe im being path logically optimistic. You actually hear from the right and left here, i think theres sort of an universal understanding we need big, bold comprehensive tax reform. This discussion, if you actually look at what were doing. 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 race. This is big time reform. And so, look, i have a personal fixation on this concept of a loss 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 10, 14, 15 years how Little Movement there have been from different stratifications. 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 plans moving forward is great for the society, from the person entering work force to person that just wants stability and wants opportunity. One of the things i wanted to come to you about is when you also look at investments around the world, and youre making that decision of your shareholders, what is in this tax plan, our tax plan that makes you decide its going to happen here in north america . What are we doing right, and what would you change . Well, the panelists said, education in our system is truly unique. I think you need to encourage that in the tax plan. Thats very important. Secondly, i think getting the tax rate down, so when i look at my tax rates doing businesses in the voouns, versus china or new england, wherever its at, getting that tax rate down is very important. Sethats our baseline. Now were coming to you and 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 . All those come into play from the standpoint that acceleration of the distribution makes a big difference. I think the tax rate from the standpoint of how much cash we pay in federal taxes or state and federal or local taxes make a big difference. But, again, i think having infrastructure, having all these things come into play, ill go through 20 issue issues relative to making a decision. Its not just tax. So we have other things we have to do. You made a comment before that youve had to change your business plodal or your production lines your research multiple times because you keep losing your customers. Could you put a little more definition on that the. Well, for almost 100 years we primarily served the Telecom Industry, and i watched as other countries made a competitive environment for people that made the chips, the boards, and all those pieces that go into electronics. And thain they needed me to make those boards and electronics. It went over seas to another country. We did some automotive work. We watched that change and disappear. So that type of work is moving. So in many ways youre speaking to where i was trying to go before. Its also a cascading effect. And for all of us here we sometimes get fixated on a single point in a complex plan and not understanding sort of a unified theory that this affects that, and that touches here. This is not just business. Were also looking at how we deal with the pasds throughs, also individual rates and how its together. For at t, what is the single biggest driver to get you as one of the biggest players in the world to make large Capital Investments in this country. The two biggest strategies would be the tax rate and immediate spencing. But quite frankly, the biggest driver would be those changes as they impact my customers. Because right now were losing customer, were taking their business over seas. The work he talked about in the Automotive Industry went over seas where im not the primary provider. So for us lets be straight. We really believe that doing these changes will generate Small Business and inside business activity, and that will benefit us through the revenue line. Thank you, mr. Chairman. Yield back. Thank you, mr. Chairman. Im grateful for being here. Very proud of the folks in our district. We have a lot of manufacturers, farmers, lot of moms and dads that are just trying to pay bills and get their kids through school and college. And ive heard from so many ceos in my district that the American Economy has succeeded in our tax code, it hasnt helped it. And i want to be a part of this committee, and im grateful to be a part of the committee to look at this. I want to run a couple of quotes past you of what folks in my district have said. He talks about why its important to lower the rates. Weve had this discussion on three hours of rates. When i get to rates why its so important to you we dont do something that would damage your interest in tax reform by not making this permanent. But baldwin, the tax preparer says more spending creates more job, and more job increases the tax pays. He said small, middle Market Companies are unable to keep capital and invest in their business with the current tax rate vierlts. He said lower rates will allow for better investment, capitalization, and increased full employment. And since were a plfrer were we also manufacturer boats and rvs. So peter barrett, said that tax cuts will allow his company to hire more workers, raise wages for their 600 employees, none of those things he says happen in a vacuum. So youve heard from my vgz district, ive heard from you. And you touched on this a little bit earlier why lower rates are so important. You touched a little bit on the issue of permanency. I think its so important as we talk about this we talk about what the distractions can be. And thats what id like to hear in your response the issue of permanence and why it should be a top priority . Capital investments are multiyear projects. It takes years to go from start to completion. And so as the rules change, as inconsistentanies change, as the rules change once again for our 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. Thats just the proven responsibility we have to our shareholders. So whether that inconsistent is in tax rates, regulatory conditions, all that goes to uncertainty. And uncertainty leads to investment. I think i spent some time in your district. You bet. The thing of concern and risk and constant changing, we talk about in if were constantly concerned about changes, we dont do anything, we freezeup and pause. I think its so important to have a consistent policy. Also ive heard a lot about supply things. Im not an economist, im a manufacturer, but we want to create demand for training, demand for skills. Ive had to raise wage. So if we can create more demand, you will see a lot more of that. Thank you. The key issue here is you have medium, small, businesses here. Were all interconnected. So whatever happen tuesday one, happen tuesday another. I think permanency is important. We do have the longterm plans and we do see it factors in, then well factor that in. Like i said, more than half my sales are outside the United States. My main competitors are german, french, german, french maybe the japanese. I just recently lost an acquisition in germany to a french company. Same forecast. My tax rate is 21 , and his tax rate is 20 . And i lose every day of the week. Tax is a major expenditure for us. As i mentioned 560 last year in the u. S. If we knew what that cost was going to be and we were able to predict tit in the long run, we could have a completely different cycle. Permanency is absolutely critical to this package. Mr. Rattner. I would certainly echo that and echo that achieving permanency creates an additional burden how this is constructed particularly in the senate that youre all obviously aware of. Thank you, mr. Chairman. I yield back. Ms. Benny, youre recognized. Thank you, mr. Chairman. And thank you all of you for being here today. I represent a very diverse district in wauds with industries ranging from a booming Life Sciences sector to agriculture. And i can tell you my constituents are asking for Business Class and small bsz tax relief. Not floor tax cuts. I heard from a mom who was struggling to pay tew titian in college and could use just a bit of relief. I heard from a Small Business owner spending 12,000 a year on a cpa to help him navigate a complicated tax code. And hes still paying a high tax rate. And theres countless stories weve heard here today from hardworking people who just want a bit of fairness and simplicity out of tax reform. And weve talked about simplicity. Weve talked about certaintity, also very important weve talked about competitiveness. I want to talk more about fairness and true impact. So i want to share some data about what happened after the bush tax cuts. According to a census report Median Income in 2007 was lower than it was in the year 2007, and according to the bureau of labor statistics employment and wage and salary growth were lower than any Previous Post world war ii expansion. So mr. Rattner, i wanted to ask you what should we take away from the bush tax cuts . Well, i certainly did not think the bush tax cuts were i think the lesson of all that is not to do it again. And how should that inform us Going Forward as we look at tax cuts inpler . Well, that should inform us first and foremost that they should be deficit neutral. Youre not in charge of all spending, obviously, but you need to somehow with your colleagues make sure the total package going through is deficit neutral using reasonable assumptions. And i think we should also, for example, there was a discussion eabout rnd and the poshs of that. Im not in favor of huge gimmicks or overly targeted tax cuts, but we should make sure the tax cuts are creating the incentatives we want to create to train and so on and so forth. Thank you. Mr. Stephans, you said pretty straightforward more investments equals more jobs in your testimony. At t tells its workers adapt or else, and really talks about at t shifting its business towards more of a digital and computing type business. Theres also a quote in that article that said that executives estimate that eventually at t could get by with onethird fewer workers, do automation, et cetera. You worked with your work force to train for the jobs of the future, if youre also going to have onethird less of a work force due to automation or technology changes, that means more investments may not mean more jobs or more workers. So im concerned about the idea that investment alone is always going to equal new jobs a we talk about the new economy. I wonder if youd comment on that. Sure, what we do at at t is our business is changing. If youre not like my children, if you dont have a dial tone phone at home, you use a mobile phone. So business changes. And so we need less people to take care of a 40 , 50 loss in the customer base. What were doing, though, is were giving those individuals the opportunity to retrain themselves. We have partnered with Georgia Tech University for an online programming at the companys cost to give our employees an opportunity to train themselves in the next generation of products and services. I understand that retraining it just still means there are less jobs and so because im running out of time, i think its important we have an honest conversation about what Technology Means for the work force and where were putting resources to make sure we have an economy that works for everyone. And so im out of time, and so i just want to yield back, mr. Chairman. Mr. Cubellow, youre recognized. Mr. Chairman, thanks for this hearing. And im also thankful my colleagues have expressed support for comprehensive, permanent, and revenue neutral tax reform. Like educational incentatives that will give families more flexibility, creating access to cleaner more efficient technologies and creating solutions for people like in puerto rico. I think about my immigrant parents and how they were able to come to this country and earn success. When they first arrived ittist tough. My mom helped her mother run a small fabrics business. On somedays my dad sought food and couldnt find any. Yet thanks to the possibilities afforded to them by the American Economy, they were able to earn more, put away some money, buy an apartment and put away some money. Opportunity was boundless. My wife and i think about our own two durts. I want to make sure they grow up in a country where they can find their own success and blossom. The decisions we make in this committee in the coming month will make that even more or less possible. I think of all those young people that wont to college and cant find quality jobs, the Small Businesses, the pop and pop businesses where i often stop by to grab my shot of cuban coffee, will our opportunity grow and invest or will we sit back and watch our opportunity diminish. My count my state counties like miamidade and monroe, which im privileged to represent i think stand to especially benefit given the entrepreneurial culture there. To our witnesses today, i have one question very unique to my area. Miami south florida is often called the gateway to the americas. Theres so many opportunity, so many ways to access different markets from miami. However, we also face competition from all those countries in central south america, and europe and really all over the world because miami is becoming a Meeting Point for people and goodies from all over the world. Mr. Farr, given your perspective for those who are innovating, opening new markets for american products, what is the difference between comprehensive reform and short term tax cuts . Thank you. First of all, we use latin america as our gateway. Thank you. When you start a company up, youre putting money in a line thats going to be there for a long time, and you want to know what that tax rush is going to be. Knowing what the rules are, and make them simple. For small companies, they have to be simple. I have hundreds of tax lawyers and Tax Accountants to deal with this. But in small companies, youve got to keep the rates low and invest and grow. And thats how it work. Thank you, i want to give you an opportunity to send a message to the American Worker. A lot of people just dont feel like success is attainable for them. A lot of these young people, go to college, get a degree. They were promised theyd be able to find a good job, and they cant find one today. And ought of people have watched over the last seven, years, the statistics show that yet low and middle income americans have strugged. Some of these people may be watching this hearing today. What do you have to say to them . How can comprehensive, bold tax reform inprove quality of life for middle and lower income americans. For all businessman the question of investments comes down to what return they can make. And when government taeks 40 of a state and another location takes 20 oor less, it makes the decision to invest here. If we make it more competitive, those investments will come here. This could be the biggest jobs invest those communities could support. Because it comes with the so tax reform equals more and better jobs. Lets leave it at that that. Thank you, mr. Chairman, i yield back. Thank you for your tenacity in pursuing this package of tax reform measures. Gentleman, thank you so much for your testimony here today. Thanks for sticking it out with us. Im the last of the group. M m mr. Shu and i will be the last of the group. Ewe think in this case the blueprint in front of us will deliver profound tax relief to all americans. And thats what were hoping to see. Im from michigan, lots of great things going on in michigan but manufacturing is very important. Its our lifeblood. And i want to share with you a letter and article i read in new York Magazine on may 15th, by a gentleman called mark schmidt. Theyre out of michigan. His toastmonial on the existence of the tool dynasty is alarming given the fact this is america. He suggests that the United States Manufacturing Sector is dying, the tool business in particular is gone. His well compensated work force is being choked off and its because we have done nothing to level this Playing Field. And i would just like to know given the short amount of time we have, and i know you cant do everything to give solutions here. But his suggestion is the chinese prices are so low, they cannot afford to buy their major dyes from anywhere else, and most has to do with the china subsidizing their businesses. He also said the industry has lost approximately 70 of its company said and 80 of its skilled jobs. And the most alarming thing in his conclusion was our industry will soon lack the sufficient capacity to supply the free worlds automotive market. If that doesnt sendoff bells and whistles and that doesnt tell us this is the most urgent thing we can be doing right now in terms of Public Policy, i dont know what will. This is your namesake, so i better make sure i ask you fist what you think about this and if you feel theres anything we can do right now that would address this problem . Thank you. I know as soon as we get these phone calls, we send them the right way. The problem is well, i dont know if its a problem, but we need a make a profit here. And were compete against companies that dont need a make a profit. The chinese just flew their first jetliner. Im afraid. Ive talked about the industries ive lost. Now im in airospace. So how can we create demand . I think thats in this room today. Thank you. Weve lost so much our Industrial Base because of these ant waited tax policies. President roosevelt took over our two facilities in manufacturing in 1939 for one reason, all our tool and dye makers. This technology is leaving, and wave got to figure out how to invest back in this country. Again, not only lower taxes but put money back into education and rnd. We can compete against the chinese if we have a level Playing Field. Thank you, gentleman. Mr. Chairman, i know youre pressed for time so i yield back. Thank you, sir. Ms. Stu, youre recognized. For many years ive served on the Small Business community. My grandfather came to california with nothing but just opened up a small restaurant and just had a handful of employees. It wasnt a fancy place, but he worked night and day. The tax rate slashes it to the current rate of 15 , claiming that this is a tax cut for Small Businesses. But just this week the Tax Policy Center found that over three quarters of the benefits of this cut would accrue to the top 1 of earners. Infact, the top 1 would see their aftertax income climb to 76,000. So mr. Rattner, could you elaborate on why this tax cut would be so beneficial to the few . Im sorry, what was that last part . How this tax cut would be belgs to the wealthgist the . Like i said before, there are maenl of the wealthiest. Their hedge funds, private equity funds, privately traded firms that taxes are passed through, the billion dollar plus market captizations, and they would all receive that 70 , as you said, the benefits of this. So i think that idea of lowering the tax rates for true Small Businesses is certainly a worth when i will goal. But i express some skepticism about the ability to address the pass throughs. In some way you leave one group on one side paying their fair share and the other group on the other side getting some benefit. Its a very, very hard tling to do. And i think our Current System with the pass throughs is a good system, but without lowering the rates to 15 and 20 because that would defer it to the wealthy. In fact, many are given this type of rate reduction is critical to the success of Small Businesses. But can you tell us what kind of businesses would qualify as pass throughs . Are there any distinctions drawn between the mop and pop restaurant or wealthy lobbyist or lobby firms for instance, would the Trump Organization be a pass through . The Trump Organization would be a pass through, but as you know he doesnt pay a lot of taxes, anyway. So the trgz has said it will address the problem you and i have been talking about, the benefit going to Large Businesses or very wegty individuals. Im personally reasonably skeptical there is a way to trau the lines to give benefits to those who truly deserve them without having a lot of leakage, so to speak, to people who dont deserve them. I have a lot of friends who operate as pass throughs, and i dont any reason why they or i should get a tax rate. They exempted tax cut the taxes on profits for more than 100,000 businesses. In fact the largest benefits were for uppermiddle class households. And there was massive revenue lauss. Kansas was then forced to raise the sales tax, get pension payments, and even shorten the school year to save money. Can you comment on what is happening in kansas and how could we avoid this pit fall on the federal level . Im not an expert on kansas, but i think it highlights a critical issue weve talked about in this Committee Hearing but needs to be front and center. That there is no free lunch, essentially. We think therell be so much Economic Activity it would somehow make up for that lost revenue, but it didnt happen. Tax cuts are fine, but they do not pay for themselves. They simply dont. And thats the lesson this committee needs to be mindful of. In constructing the tax package it should be neutral. Thank you. Thank you, mr. Rice, youre recognized. Thank you, mr. Chairman. Before i came here i was chairman oforian county counsel in South Carolina and i saw firsthand how counties compete to attract through regulatory changes, tax changes and then states have done the same thing to attract to be more competitive and attract more investment work. But what has our country done . What our country fail tuesday rig, we argue about maintaining this revenue or that or how these benefits are going to be dispersed through society, but the fact weve got tarecognize is we are in a global competition. We can change a lot of laws here in washington, the one law we cant change is economic law. And we cant change the law of economic competition. I have a question. I thought your testimony was right on point about the border ajudgment and why the countries have done that. Its simply a disguised tariff and puts us at a huge disadvantage. Lets assume this scenario. Youve got an American Company paying a 35 tax rate and youve got a European Company and Irish Company paying a 13 tax rate. And they both compete to buy the same materials, make the product and both compete globally through the same customers. Can you tell me the end of that story. The one with vat taxes are going to win. The American Company either going to get bought by the european or Irish Company, right . Right. Mr. Rattner, do you agree with that. First of all, it would be a massive upheaval in our economy. We also have to recognize theres 150 or 140 other countries in the world including every single major industrialized country including every one of our competitors doing the exact same thing. And how can we sit here on our hands and put the American Company at a disadvantage its not completely onesided. We have the state and hedge fund taxes that compete on a lower level. If the investment on the dollar does not happen, it would raise prices for goodies income tax cuts, if the currency doesnt adjust fully, therell be some increase in prices. Based on these Tax Foundation estimates, their incomes will go up far more than these potential sales costs would. The signs of the american middle class and their income level has really declined. Its nut a recent phenomenon. Its declined in the last eight years, declined the eight years before that, and eight years before that. Its been going down since 19890, 20 years, the last time the code was revised was 1986. I wonder if theres maybe some correlation there. The decline of the american middle class and the growing income we all fuss about is a direct and foreseeable result as the continued deterioration. Our tax code puts American Companies at a disadvantage. And that translates to the loss of millions of american middle class jobs. If we truly want to grow the middle class, if we want to give them a raise, if we want to reduce income inquality, we must make our tax code competitive in the world. That has got to be our number one goal. I yield back, mr. Chairman. Thank you, mr. Rice. Mr. Higgins, youre recognized. Thank you, mr. Chairman. Couple of things. The American Economy, were 5 of the worlds population, 23 of the worlds economy. We have the strongest economy in the history of the world. Despite all the macroeconomic indicators pointing up job growth, low unemployment, growth in the stock market, weve lost 6 Million Manufacturing jobs in the last 15 years. 56,000 factories have closed. We just had an election where two unconventional candidates rose pretty quickly on both sides. Donald trump, our current president beat 16 established republican candidates. Hillary clinton on the democratic side was challenged by a 23yearold socialist from vermont who garnered 12 million votes and won 20 primary caucuses. Theres something underlined that isnt being addressed. Regardless of our political persuasion, we all have a major stake in this. Give you an example. Between 1945 and 1980, real income and wages growth at the same time by 95 . There was shared prosperity. Economists called it a Virtuous Cycle of growth. And the american ceo felt it was their responsibility to balance the economic interests of all of the stakeholders. Shareholders, the owners of businesses, the managers, and the employees and the communities within which these corporations operated. Between 1980 and present, we had productivity gains in the American Economy by 89 . Real income in wages have grown by 9. 75 . So if youre looking for the cause of the political disruption, that people just voted for, isnt that underlying issue of economic inequality. Now, i think a lot of people would view that personally and say that means more taxes for me, and i would oppose that. I dont think thats necessarily the case. I think we can reach a point at which we can move our tax policy out a political realm. Perhaps thats naive. The tax policy either works or it doesnt. I think supply side is discretted. The new term for that is dynamic scoring. And it basically says tax cuts will pay for themselves. Tax cuts do not pay for themselves ever. So i think what we need to do is address whats going on here in the American Economy. Because as i said, people voted for disruption. Mr. Rattner, let me just say this to you. Supply side trickle down, dynamic scoring says lets give the very wealthy a big tax cut, and thatmony will find its way back into the economy in new Business Investment, in job growth, right . Wrong. It hasnt worked. Today American Companies are holding 2. 5 trillion abroad. An increase of nearly 20 in the last two years. Its 14 of the American Economy. United States Companies are holding 1. 94 trillion in cash domestically. Zero yielding money markets are holding 2. 66 trillion in investor cash, and banks are holding over 2 trillion in excess reserves in the federal reserve. Thinking together thats over 9 trillion, why isnt that money finding its way in the American Economy, and why would massive tax cuts to the wealthy have any measurable difference and what it hasnt done historically . Mr. Rattner. I think first the manufacturing issues in the u. S. Are not simply a function of tax code. There are a whole variety of factors that have caused us to lose quite a number of manufacturing jobs. Second, as you point out there is an abundance of capital in this country. Some of that may have to do with the tax code, a lot of that may have to do with the perception our economy isnt growing that fast and there isnt enough demand. I see were out of time, so ill stop there. Thank you. Id like to thank our witnesses for appearing before us today. This is discussion about how we grow jobs, grow paychecks in the u. S. Economy and the role tax reform is doing that. You made all very compelling argument for bold tax reform, permanent tax reform, and doing it now. So i want to thank you for being here today. Please be aware the members of the committee have two weeks to submit to you written questions in writing. Your answers will be part of the formal hearing record. Thank you, and the committee stands adjourned. Fbi director james comey goes before the Senate Intelligence Committee Thursday as part of the committees investigation into allegations of russian tampering in the president ial election. Back in march then director comey testified over the house Intelligence Committee about his goals for the investigation. And heres what he had to say. I have been authorized by the department of justice to confirm that the fbi as part of our Counter Intelligence mission, is investigating the russian governments efforts to interfere in the 2016 president ial election. And that includes investigating the nature of any links between individuals associated with the Trump Campaign and the russian government and whether there was any coordination between the campaign and russias efforts. As with any Counter Intelligence investigation, this will also include an assessment of whether any crimes were committed. Because it is an open, Ongoing Investigation and is classified i cannot say more about what we are doing and whose conduct we are examining. At the request of leaders we have taken the extraordinary state with the cooperation of the department of justice of Briefing Members including members of this committee in a classified setting about the details of the investigation. But i cant go into those details here. I know that is extremely frustrating to some folk, but it is the way it has to be for reasons that i hope you and the American People can understand. The fbi is very careful of how we handle information about our cases and about the people we are investigating. Were also very careful about the way we handle information that may be of interest to our foreign adversaries. Both of those interestserate at issue in a Counter Intelligence investigation. Please dont draw any conclusions from the fact that i may not be able to comment on certain topics. I know speckilating is part of human nature, but it really isnt fair to draw a conclusion simply because i say i cant comment. President trump fired mr. Comey last month. The former fbi director will testify thursday before the Senate Intelligence Committee Investigating russian activities during last year emphasis election. We will have live coverage here on cspan 3 of the open hearing beginning at 10 00 a. M. Eastern. Today is the Vice President s 58th birthday. His staff celebrated by surprising him with dedecorations on air force two. [ applause ]