Kevin brady it was the early 1960s. Carl chairman brady still plays. He is a twotime m. V. P. For the republican congressional game. He played last summer. Some of you might have seen them. Seven line up at second base. He lost his job to a man who beat him out, and he left the practice field before the game because he was asked if he could take some grounders. He said no. Steve scalise has won the job, select him be there. I am glad you are here, and thank you for coming. As you all know, he is trying to do something that is hard for republicans, and that is in acting tax reform. Are you ready for some hardball questions . Kevin brady yes, sir. As long as we can start with i am wearing my astros time today, so feel free to cheer whenever you want. World series tonight. Carl cannon in the house going to pass the Senate Version of the budget on thursday . Kevin brady the answer is yes. We are in a good position. I think the work the senate did ought to be applauded, and chairman black who chairs our Budget Committee worked with the senate on incorporating some of our ideas. I feel real good about wherewe are headed on this. This week. Usch coral accelerates for by several weeks by getting this budget done because that is once , it is signed, sealed and delivered we will announce the date of the markup and the date the Tax Reform Tax bill willbe will be released. Once its done were going to move. Carl cannon i should introduce myself. I am coral canyon carl cannon washington cochief of real , clear politics. If you know real clear politics you know that we are nonpartisan so let me ask a question that is sort of in our wheelhouse. The budget, you know, passing the budget is so you can use the reconciliation process during this is a washington word. The process doesnt, in normal english reconciliation is not what it is. What it is is oneparty rule, and the budgets have been passed this way since 1993. Im asking you a sort of a Good Government question. Is that the way you should do it . Shouldnt they be both parties . Theres no moral equation if the tax would 38 or 37 so why shouldnt both parties participate in it . Kevin brady well moving to , reconciliation doesnt preclude democrats for engagement in this process. It just ensures no one party and in the senate can block us this from getting this to the president s desk. Im hopeful that we can, i know on the house side, we spent the last year reaching out and senselessto our democrats about what is important to them. I think they are seeing the same thing we are, a lot of young people came out of school, cant find good paying jobs, they are seeing the same companies we see moving their jobs and headquarters and research overseas. And so i think we share a lot of the goals of getting this economy moving again. I dont want to predict that we will attract democratic votes in the end, but i think the time we are spending with Suzan Delbene and others who are bringing i think terrifically good ideas to discussion i i think it is time well spent. Carl cannon so right now the , white house has endorsed a plan with these three tax brackets. I guess 12 , 25 , 35 . On friday your predecessor of the powerful house ways and Means Committee paul ryan threw out the idea there will be a fourth bracket. This is something thats been floated. We could call it the george soros or the donald trump family bracket. But my question, where does it start . 1 million, 2 million, what are we talking about . Kevin brady so i dont want to get ahead of our committees work. Carl cannon i want you to. I want you to. Kevin brady i know you do. [laughing] kevin brady so does everyone in this room. I dont want to get ahead of them. We are considering it as the framework with the president and the senate that taxwriters laid up in were looking at three brackets. Our focus is on delivering a very progrowth, middleclass taxcut, and i designed of the and it is a sign of the codes that grows the economy in paychecks in a major way. So were looking at it from that perspective. Could a fourth rate help us deliver that growth in that middleclass taxcut . And we are still in the work and still picking through the design. Carl cannon paul ryan hinted that the rate would be 39. 6 for this fourth bracket which is the top bracket. Does that number sound about right to you . Kevin brady so no decisions have been made on that. Carl cannon well, you have declined, and politely as you are doing here, to say what is where these brackets start exactly. I guess one question i have, is that because you dont know and youre still working at the numbers to make the numbers come out, or is it because you dont want people taking potshots at your plan . Kevin brady its because unlike the reagan style reforms, which we model a lot of this after, the rates alone dont tell the whole story. Because we are eliminating amt, because we are eliminating the estate tax, and because we are making sure our Small Businesses, they are not left behind those interact with those , higher rates differently than just the rate cuts. We want to make sure that were delivering top to bottom relief so that americans keep more of what they earn. We want to make sure we know the interaction of all that. So its just a case of being thoughtful and making sure we know the real impacts before we in where thes brackets begin. Carl cannon when democrats talk about this they talk about tax they talk about fairness, and that something that i think most people care about. Complicated it gets as you point out. If you make 400,000 a year in rapid city, south dakota, where you grew up, thats more money than if you made 400,000 in new york city. Kevin brady absolutely. Carl cannon so how are you going to finesse this . I am thinking of course of several things but one of them is the deduction for state kevin brady no, it is a terrific question. So there is, if were focused on growth of paychecks and jobs and leapfrogging america into the lead pack worldwide, and keeping us there surprisingly fairness , plays a big role in that growth. Because you just imagine the tax simple, nine and out of americans could file 10 using a postcard style system. There is a fairness to knowing what everyones deductions are because we have and use exactly the same ones. Another reason we havent set those brackets yet and the rates are that we are working with lawmakers from the high tax states to ensure that their taxpayers are better off in tax reform than before. And so because we are eliminating a number of those plays into that too what will the final rates and the brackets be. Its just a matter of making sure we have, were hitting our goals, including fairness and growth, before we set them. Carl cannon all right, so lets take, if you live in west virginia, in harpers ferry, and your coworker, you work at a plant. Your coworker in loudoun county, your coworker that lives right across the river, lives in maryland if you get rid of the state and local tax break if, then one person has gotten a tax cut and the other has a tax increase. These two people work sidebyside. One pays a higher federal rate. That just doesnt seem fair. Kevin brady you are describing the current taxcut. Carl cannon no. If you eliminated it is actually kevin brady actually i think you are. So depend on whether you are itemizing or not, so this is a really good question for tax reform. So we can stick with the status quo where we keep the federal tax rates artificially high for all americans, so some can use their itemized deductions, including state and locally. And while we do that, we just subsidized each other. Rural communities, taxpayers subsidize cities middleclass , tend to subsidize higher earners. Low tax state subsidize higher tax states. Thats the status quo. Or we can do something different. We can lower the taxes for all americans, and we just pay our own. So for the first time, washington doesnt punish or reward you based on where you choose to live and work. It is a big change from where we are at today, and the reason why, i think, its critical we find Good Solutions for lawmakers in the high tax states. We want their families to be better off due to tax reform. Carl cannon all right, let me take let me ask a philosophical , question about it. After were done Suzan Delbene, who is on your committee, a democrat, is going to come up here, and shes from a blue state, Washington State on the panel. After that steve morrow is on the panel, a fiscal conservative. So were going to ask them, but there seems to be you know, you have seen the coverage coverage of it. Are we punishing blue state voters . Are the tax there is nothing in this tax code that politics are completely eliminated, that were not rewarding states that supported the republican ticket and conversely punishing using , an incentive to get state and local taxes to come down too because those will no longer be a deduction . Is that a fair question . Kevin brady well, i think this is a political temp so people go to political motives. I think in this case they are wrong. Because from a fairness standpoint, a construction worker toiling away on the first floor of the building who doesnt itemize, has a pretty modest income, who is paying a higher tax rate from the investment banker renting the highest floor who can get a tax break. Why dont we stop doing that . Why dont we treat them equally in the tax code . Why dont we lower those rights for everybody . It is in my view, certainly not from our viewpoint ways and Means Committee or in the house conference we put the tax plan in the beginning to go red or blue state. We want to dramatically grow jobs, paychecks in the u. S. Economy, leapfrogged as to the leadback into in what people are better off. Carl cannon one of the ideas thats been floated in the last few days about trying to make the state and local income tax fair, to try and raise the revenue, but not have the effects we are having is to , put a cap on it. 400,000 was a number i heard. Does that sound about right to you . Kevin brady 400,000 middleclass family . Carl cannon in new york city. Kevin brady ill tell you, it stuns me how high property taxes and sales taxes, income taxes are in these high tax states. I am amazed. I dont know of families get by. And im always suspect on the same local politicians who have been assessing these high taxes are now suddenly concerned about taxpayers. Carl cannon [laughter] kevin brady my belief is that for those families, when we lower the tax rates, when we increase the child tax credit, when we set those brackets, altogether, we can lower their overall burden. Without having that specific deduction in there. And were listening, carl, right near to lawmakers from the states on how best to do that. So im hopeful, no, im confident year over the next 10 days we are going to find a good solution. Carl cannon so when republicans talk about tax reform, cutting corporate rate seems to be one of the most animating issues. You know the arguments, youve heard them, youve made them, on trillions of dollars because parked abroad because ceos dont want to pay, the companies dont want to pay 30 tax rate. Donald trump always reminds us that, you know, american corporations are the highest taxed in the world and , icheck. Org and said yeah, thats pretty close to being right. But do you think, what is the evidence cutting that rate will really bring all that money back that is overseas, and that it will convert to new productivity and it will increase what workers wages would . Kevin brady thats a fair question. What we know is your tax rate really varies depend on where your business is at. If you are allamerican, staying here, you are about 35 . If youre globally can vary dramatically in those rates. Allin the day, they are competitive compared to europe, china, mexico. The Business Roundtable just released a study that shows that our tax rate had been 20 over the last decade, we would have 4700 more businesses in America Today than we have because so many have been acquired or moved or shifted overseas in a major way. We know too that we have to change what we are doing if we want paychecks to grow. They have essentially been stagnant for decades. And even this last round, carl, where it showed maybe 2. 5 , 3 growth in wages, and you think its coming back, look closely. Because what it showed the work fulltime in america, their who work fulltime in america, their paycheck increased again was zero. So we know if we make businesses competitive whether , youre competing around the world or on main street. When you do full and unlimited expensing, so they can invest in the plants can equip, software and technology all that tries drives productivity, that drives wages in major ways. We are in each of these designs focus on that growth of paychecks and jobs, and im really optimistic that this design does leapfrogged us back into that lead pack and makes our companies so much more competitive. Carl cannon i have one more question and then i will open it up to the audience. Are you worried if this doesnt work that its a gamble that the National Debt doubles and in the eight years of george bush, it doubled, then it doubled again under barack obama. If this doesnt spur the kind of product growth you talk about this tax income you could double the debt against. Kevin brady im pretty sure the debt will double if we dont enact tax reform. I think if we stick with the slow growth economy, were not going to generate the revenues and growth that we need forthe we need for the country. With restraining, we have got to make the entitlement programs solve it for the long term. So this is one key part of getting our financial house in order. But i know this, we get growth back on track to our traditional level or better, it generates significant revenues. Not just at the federal level, carl, what we know from the kennedy cuts, we know from the reagan cuts as well, the communities that saw the greatest Revenue Growth were at the state and local level. When people go back to work and when their wages are higher, that with the growth, i know there are some states that wonder how will we be affected . What we know is growth gains at every level. All right. Kevin brady i promised chairman we would get them at a timely way, but we have time for a few questions. Youve got a mic, all right. Why dont we start right here, he is close, and then back there. He looks loaded from here. [laughter] yeah, hi, my name is peter sumner. My question is capital intelligence. I just came back from i just , came back from puerto rico with the president. The question everyone in puerto rico has is whether you will if we can bring back the 936 section of the Tax Exemption for puerto rico. That would be the biggest hell. Biggest help. Bill clinton killed and thats basically been like the root cause of all the problems. Kevin brady so no decisions have been made yet, but we have been working with the delegate. She has been visiting with us about sort of the overall with the tax design should be for puerto rico from an economic standpoint. I think the hurricane which weve experienced in houston as well has made that situation even more dire, so we will continue to work with her on trying to shape this in a good positive way on tax reform. ,kevin brady back here. Ben evans with the alliance to save energy. I know a lot of the talk is run simplifying the tax code, but traditionally you know congress has done a lot in a very bipartisan way, particularly in energy space to encourage certain things to the tax code. Right now we dont have any incentives for Energy Efficiency in the tax code, and they expire at the end of the year. All the benefits that come with encouraging that activity in terms of, it is the best solution we have for carbon, job creators in terms of trading weatherization work and all the Energy Efficiency work there is, saving consumers and businesses money when they become more efficient. How do we ensure that the tax code continues to support those things, and is that something youre looking at . Kevin brady yes. I think the best thing we can do, cut Business Rates by an average of 40 , create an effect taxfree investment in the type of Energy Efficient technology that drives these gains. I think all of which by the way are part of our tax reform approach. I think thats the very best thing we can do. I think one of the challenges i want to bypass many of our energy incentives, specific ones to the free market over time, and create a tax code that encourages new investments, new technologies. Not single them out but , encourages that in a broad way across the economy. Carl cannon congressman, mr. Chairman when word leaked out , you look at the 401 k deduction, donald trump tweeted out no, that wont change. Does that, when he does things like that, does i complicate your life . Kevin brady well [laughter] kevin brady everything complicates my life these days, just so you know. Look, i love working with him on this. He calls me regularly about tax reform. We talk about specific areas of it, and so i and hes out selling this and not just a reagan style reform that it trump style salesmanship. I think it is incredibly helpful. And in the 401 k area look, we have a goal. We want americans to savemore to save more and save earlier. Reformk progrowth tax done right can achieve it. Carl cannon all right. Ill let you go but one question, baseball is like politics. Theres advanced metrics in baseball these days. Favorite metrics, tax reform. Lets have you put a percentage on it. What are the odds you get tax reform by christmas, or even thanksgiving, which the president said he would like to something around thanksgiving . Give us the odds. Kevin brady ive learned my lesson on picking a date on anything. So i have one date, 2017. I think the odds are very good we get this to the president s by the end of the year president s desk by the end of the year. Carl cannon 70 . Very good is very good, ok . Kevin brady it just is. Think about this, just to put it in perspective its been 31 years. President reagans reform, janice and i were talking about this before the discussion. The reagan reforms really let up over a number of years, and the final push was two and half years long. We are accelerating that into one year. It is an ambitious timetable, but im confident we can get this done. A lot of work left to be done. And by the way, carl, as we finish the budget, lay out the tax reform bill from the ways and Means Committee, we will continue to look to improve it at every step of the way. So we will be asking families and businesses take