The subcommittee will come to order. Welcome to the ways and Means Sub Committee on tax policy our hearing on how tax reform will simplify our broken tax code and help individuals and families. Before we get started id like , to yield to the chairman of the ways and Means Committee , congressman kevin brady to , introduce a distinguished witness whos before us today. Mr. Chairman . Thank you for your leadership of the tax policy. The Sub Committee is such a important time in americas history. And thank you for leading hearings like this that allow america to have the conversation about creating a bolder, fairer, flatter and pro growth tax code. I want to thank all our witnesses for being here today. I want to give a special welcome to our friend chairman bill archer, former leader of this committee and a longtime mentor to me personally. Chairman archer thank you for , being here to share your insights and experience on tax reform. I know everyone on our committee is familiar with chairman archer but id like to talk about him and his legacy. Hes served on the committee for 28 years. He was chairman from 1995 to 2001. During his service, chairman archer was closely involved in several historic efforts to make our tax code more simple and fair to all americans. He was a strong voice in dealing the Tax Reform Act in 1986 to lower rates for americans, eliminate complexity for taxpayers. When he took the gavel in 1995, he brought the same passion and determination and insight, always striving to make the tax code work for the American People not against him. , he was the chairman long before software did his own taxes year after year. So, he knew intimately the complexity and the cost of this complicated code. So in many ways chairman , archers leadership helped lay the foundation for the kind of pro growth, bold tax reform we are pursuing today. To me his leadership often , serves as a source of inspiration as we strive to fix the tax code for families. And individuals. When chairman archer retired, i of takingthe honor his seat on ways and means. And it is my honor as chairman to welcome you back to the committee. Thank you for your decades of service and for joining us today. We have so much to learn from you and we are excited for your test money. Thank you for that welcome testimony. Thank you for that welcome , mr. Chairman and thank you for , the job youre doing on tax reform. Thanks i yield back. Thank , you chairman brady. Think about it, right now on iphone, i can bull up a airline flight, i can get a eticket mailed to me on my iphone, i can have it charged to my credit card and get a boarding pass all within the twinkling of an i. If i have 10 seconds of that thing spinning around, my attitude is what loser made this . It is ridiculous. And yet we have a expectation of ease and simplicity that is the norm right now. Contrast that with our tax code which is so complicated that , every year the majority of taxpayers cant figure out how much money they owe by themselves. Our tax code is so bloated its draining our productivity and a headache for nearly every taxpayer. There is good news. Nobody likes it or defends it. There is nobody in this country who says oh, the Internal Revenue code . I love that. Do not make any changes. Nobody likes it. Now people like certain elements of it and we have deep divisions among us about the directions we want to go. But its so interesting nobodys defending the status quo. There is better news. We have a solution that will grow the economy, lower our tax year, andy dramatically simple five the code. Last week we discussed the important ans of growth. Importance of growth. Taxpayers would see tax growth in the estimate of 1. 7 million jobs and 7. 7 higher wages. Today well focus on the burden of filing taxes as a individual. Every year millions of americans spend hours trying to figure out what they are. Combined, americans spend 2. 6 billion hours to figure out what they pay to uncle sam. This is 2. 6 billion hours in lost activity. What should be a simple calculation is so complicated , that nine out of ten people either pay a professional or have to buy software to figure out how much they owe the government. When i think about a household filing their taxes, i think about a family and my own constituency sitting at their Kitchen Table with a box full of receipts trying to figure out what they owe. Theyre looking at the 1040, can we deduct enough to itemize, or should we take the standard deduction . The qualify for the additional standard deductions, and take the personal exemption for the children and the tax credit. When they really get confused about what they have to pay the government they can read the , helpful irs guide for individuals and by page 206, no lie, it starts out with how to figure your tax. The whole time theyre thinking in the back of their heads if they had enough money to hire somebody to do it for them , theyd be paying less in taxes. Thats because for more than 30 years, the tax code has not been updated. It is ballooned with special interest. The standard tax form, the now 1040, contains more than 80 different items and the additional complexity is a cost for everybody. Clearly somethings inherently unfair when the family perceives they pay more to the government because they dont know more about the tax code. What we propose for individuals filing is something as simple as a post card. Now, if you can add and multiple y you can do your own taxes. No more uncertainty. Well have this post card available in a hard line form and online form for every taxpayer to use. Why did we make it the simple, and how did we make it this simple . We proposed to deeliminate all first, but two deductions and took the seven brackets and reduced them to lowering the tax three, rate for every american, and we paired together the standard deduction, traditional deduction, and the personal exemption for taxpayer and spouse and used the savings from eliminating deductions to double the standard induction which we , expect that 95 of americans will use that. Finally, we combined the Child Tax Credit with the personal exemption for children and dependents into what larger one larger credit. With these changes americans , wont have to worry if their they are wealthy enough to get a better deal on taxes. Will be laid out in plain english for all to see. As a committee we have a choice, we can accept high rates and a confusing code or grow the economy, lower rates and create a fairer system that americans can trust. I think the choice is clear. With this in mind, im pleased to welcome our witnesses and i look forward to listening to all your testimony and working with colleagues on both sides of the aisle to determine how we can create the best tax code that helps all americans, including my constituents. Now, for the purpose of his opening statement, id like to recognize my distinguished friend, the Ranking Member, mr. Doget. Thank you mr. Chairman for your courtesy and a welcome to all our witnesses. Today we consider the impact of tax reform on individual taxpayers. This is the first consideration of this matter in the 13 months that have passed since the House Republican blueprint was announced. Our hearing coincides with what appears to be the demise of the first republican tax cut this thi year, which largely masqueraded as a Health Reform bill. Its constructive to consider how that bill proposed to assist individual taxpayers from the more than 400 billion in tax breaks for individuals that is proposed in that bill. Those making more than 1 million each year would have pocketed a average of 57,000 a piece. Any small tax cuts for middle class families would have been mostly wiped out by increased health care costs. It is also instructed to look at how that bill was presented and to hope that lessons have been learned from the approach of putting the bill under lock and key in the capitol, denying even some republicans a opportunity to see the bill, and rushing it through without a single administrative official or expert coming forward to testify about the bill or be held accountable for it, all in a allnight session where all democratic amendments were denied. One would hope that that experience, given the failure of the bill, would not be repeated. However, there is some concern in questions that have been raised in the Senate Finance committee this same week as to whether any tax reform legislation will be presented for hearing. Senator mccaskill asked chairman orrin hatch to commit that there would be a hearing on tax legislation and it would not all be written behind closed doors. I will submit for the record a n exchange about that with senator mccaskill and i hope we will not see the same thing happen here in the house and that senator hatch will reconsider and make this a more open process. Certainly there is a need to simplify our tax code. Many of the additions to the code have in fact been made in recent years in this very committee, as loopholes and special advantages were offered to some that added complexity to the system. I have authored legislation that is designed to consolidate existing credits for Higher Education into a expanded American Opportunity tax credit make it easier for more young , people and not so young to Access College and to use the same credit for job training as so Many Americans are trying to seek new opportunities that will make it possible for them to provide for their family in a more adequate way. This bill would also ensure that students receiving pell grants can get the full benefit of the American Opportunity tax credit. Thats important because at this very time, the House Budget Committee is considering a budget that makes incredible cuts to education and social services, including the funds that are available for pell grants. Our Ranking Member mr. Neil has advanced legislation to make tax credits available to the working poor who have no dependent children, a idea speaker ryan has endorsed though not with significant push to get it passed. We have offered a bill to expand the Child Tax Credit. I think each of those offer a potential for discussion but not , if they are only to be crumbs off a table that has been set like the last tax cut bill for those earning more than 1 million a year. I think as we look as t individuals it is important to rule the menu general rule, named for the president s secretary of the treasury who said he is not seeking any net tax breaks for the wealthiest few. While we simplify and add fairness to the code, there would not be a net tax cut for those at the top, actually as mr. Trump had originally proposed and has proposed in the blueprint. I would like to see us follow that rule as we consider simply and fairness. We takethat any action does have to be balanced against to the many wrongs that are being submitted as we meet in the Budget Committee to cut back on job training and all educational opportunities. Thank you, mr. Chairman. I look forward to hearing our witnesses. Thank you, mr. Doget. I think you have some excellent points. Let me comment briefly. I think the admonition about process is a good we know what one. Failure looks like. We know when nancy pelosi says we have to pass the bill so you know whats in it, it creates confusion and failure and a lack of cohesiveness. I was on this committee sitting right down there when we were considering the Health Care Bill when charlie rankle, former chairman, was sitting in this very chair. He was asked by dave camp or one of the other Senior Republicans of the ways and Means Committee at the time, when are we going to hear about the republican amendments . Charlie wrangle said soon and very soon. Its a line from a gospel song i remember as a child. Thats why i have a independent recollection of it. Of course we never got to those , were having our fourth points. Were having our fourth hearing on the blueprint. Theres been a lot of discussion on the camp draft as a prelude. A lot of discussion about the blueprint. I think this is the time to transition to having more insight on this by introducing our panel. First of all, weve got the honorable bill archer who , chairman brady already introduced as the former chairman of ways and means and is here as an example of somebody who knows how to craft legislation and bring it to fruition. Mr. Chairman, we welcome your testimony. Mckay, chair of the council for a light tronic revenue communication advancement the council for electronic revenue communication advancement. Is johnny asked out jonia stout. A Practice Leader and could cofounder of the fiduciary plan advisers at hightower. Eric rodriguez. Thank you to all of our witnesses. You have five minutes. If you go over the time, ill be gentle and increasingly harsh to have some tight corners. Well hear from you in order. Thank you mr. Chairman it is a honor to be in this room again. Chairman can you make sure the mic is on . I pressed the talk button, but it does not seem to skooch closer. Hows that . I dont know what else to do, mr. Chairman. I think that is better. Just lean forward when in doubt. Ill get closer as i can. As chairman brady said, ive spent many years of my life in this room. And i have a Great Respect for it and great admiration to each , of you who serves today. When i was on this committee, there were many challenges and many opportunities, and they exist today, and they probably will exist 25 years from now. But i think the congress has pressed a unique capability to alter the course of our country in a positive and a momentous way. Allowedhat you will be to rise to the occasion and complete the longdelayed goal of fundamental tax reform. This would simplify and rationalize our tax code. Changed the world has trained dramatically changed dramatically since for americans to compete in the 2001. World as both individuals and businesses is in many ways much more difficult and certainly more challenging than it was. Tax rates have risen and complications have increased. Understand that there have been in the tax changes code since the 1986 tax reform. That is very difficult for individuals who are trying to cope with it. Probablythat figure is out of date, much greater today. Of thend the efforts committee, and particularly chairman brady for taking the lead to advance the indisputable goal of simplifying the code and helping make the u. S. A leader of the world in terms of having a tax code that gives our competitive advantage in the country a competitive advantage in the marketplaces of the world. I count myself as being a fair individual. And all i ever want for this country is a fair advantage. And hopefully, thats what we had in our tax code 30 years ago. But we have lost it. In my opinion, its not enough to achieve taxpayer parody with the rest of the world, we need to work to develop a clear and competitive lead. The blueprint that was released last year as a starting point for the committees discussion is a truly comprehensive document and a courageous one, as well. It was built in many respects on the actual bill introduced many years ago by former chairman dave camp. The foundations have been laid for a debate that is long overdue. Know well the vagaries and twists and turns, but i urge you to plow ahead and develop a comprehensive document that will be the new starting point for this effort. Only did i do my own federal tax return, as chairman brady it with a but i did pencil and a yellow writing tablet, and not a computer. Believe me, it took a lot of my time. It was very frustrating, but i at least had the help of the staff of the joint committee and the ways and Means Committee to help me when i got into real difficulty, and i did that particularly on one part of the code that related to the Tax Deductions for members of congress. There was no form. And so i contacted the joint committee and was told, well, we cant give you a form. But i think we can tell you how to prepare one by hand, and i believe the irs will take it. Thats a terrible tax code. I hope thats been corrected since then, but i doubt that it has. I did not in any way the little belittle th the political effort needed to achieve the goal which you seek. But, there is a support group of many, Many Americans who may not be heard to offset the support group for every special provision thats in the code , that you must counteract in order to be able to finally reach your goal. Until recently, one of the real problems has been expiring tax provisions which required almost annual legislation and whose costs would have to be incorporated into any major bill. I commend the committee and the congress to have so aggressively for having so aggressively addressed this problem in 2015. It was clearly a massive stroke to make tax reform possible. And here in this effort was a concept of permanence in the tax code. I urge you to make this the hallmark of any tax legislation. The American Public needs to be able to plan and make their Financial Decisions in a environment where the tax provisions do not change every year. That makes it extremely difficult. I have always described our tax code as a attractive nuisance , and to me that is what an income tax is. And for those of you who are not lawyers, a attractive nuisance means that whatever you provide is going to, like a magnet, draw in all kinds of complications that are going to be very difficult to resist. And thats what we have today. Sadly, i think every income tax does that. And im going to adlib just very quickly and tell you that i lost confidence in being able to really have a effective and simple income tax at the end of the 1986 a liberations. I personally said, and its a matter of record, i think we should abolish the entire code and replace it in a consumption tax to where the individuals in this country do not have to deal at all with the irs. To me, that would be very, very attractive. But thats a big step. And its a step that is beyond where you can go. I couldnt make it happen. So, im sur