are grateful to have you here to discuss your thoughts on this matters. i've stayed my view the presidential leadership will be a key component to any successful tax reform effort. just last week i quoted president obama in a speech on the senate floor in 2012. he said things like our current corporate tax system is outdated, unfair, and inefficient.he never g the problem was that president obama never got around to meeting out on tax reform. i expect more from president trump and tax reform, that expectation comes in large part because of knowing him annoyed the way he approaches things.o i have to say also because he and secretary mnuchin have been talking about it so much. but more than that they engage a in congress on these issues. ise i believe your nomination is another way this president has further demonstrated histment commitment of confirming the commitment of the job killing tax code. your tax expert and will play crucial part of this in denver. before i finish up i want to address another important issue, one that i want to stress withcm all nominees. whether talking about tax reform or the administration's existing tax policy, it is critically important that we keep open lines of communication between both parties in congress and the executive branch. my hope today's you will commit to providing timely and responsive answers submitted by members especially if they sit on this committee. that is the expectation and anything short of that is unacceptable. with that, i thank you for being able to be here today. i will turn to senator wyden for remarks. >> thank you very much.only a since this is a tax policy doubleheader for the finance committee and where only at the halfway mark i will be brief this morning. mr. carter has been nominated to serve as assistant treasury t secretary for tax policy. it's a very tough job. j it's especially challenging when the congress is gearing up to work on major tax legislation where i very much share senator mccaskill's view on the importance of a be a bipartisan. in my view the hardest is guaranteeing that everybody in america has a chance to get ahead, not just the fortunate few. tax reform becomes a partisan exercise in slashing rates for just the wealthy and biggestamec corporations, the american people see this as a con job. that's because it will leave in place the root causes of the appalling -- the fact is the tax code in america today is a tale of two systems. there is one system for cops and nurses and it is compulsory and strict. their taxes come out of every single paycheck. then there's another system for the lucky few that says you can pay what you want when you want to. goes without saying the nominees for top jobs in tax policy need the knowledge and experience to fix this route unfairness.tal tm it's vital to make sure nominees have not contributed to problems in the first place.e real c i have real concerns that i have talked about this about several matters that took place during this time as director of national tax that -- young. they did a great deal of work to set up tax shelters. in the process there were people convicted of fraud and obstruction for covering it up. ernst & young paid more than $100 million with the justiceth department over the tax sheltera marketing. in the vetting process it became clear that mr. carter was regularly informed of decisions that allowed ernst & young to profit. mr. carter has told me that he had no direct role in misrepresenting them, yet i remain trouble that it was at the top of the department that engaged in these practices. this issue will come up andssist finally a job that requires close communication with both sides of this committee. over the past few months the administration has taken a lot of hits for republican and democrats alike of ignoring questions on -- i want to be clear that it is completely on acceptable for an administration to stonewall increase to the members of congress. members of congress don't do it for sport. we have an obligation on behalf of the millions of people we represent draft tough questions. i expect to respond to questions of the committee regardless of whether or not they have a d or in our next to their name.me. thank you for being here. thank you for visiting with me. >> chairman hatch, rankingng member wyden it is an honor to appear before you today. i feel both privileged and humbled to have been recommended by stephen nomination and nominated by president trump to serve as assistant secretary treasury for tax policy. as a former tax staffer and member of this committee, i have deep respect both for this committee and the institution o. the senate.ren i look forward to the opportunity to serve this country again. i'd like to take a moment to think my family has been a constant source of inspiration and support for me throughout my career. my wife kathy and my two children hillary and david. i like to express my thanks to those i've been able to visit with over the past couple of weeks. if confirmed, i look for to working with you in a bipartisan, collaborative and collegial manner. i grew up in a small town by the name of plymouth. it's in the coal mining region of northeastern pennsylvania. my father worked as account for the call mine so my mother was a high school teacher.t the i spent the most my career as a tax practitioner and leading tax reform. i'm currently a partner in a tax office. prior to that i spent over 30 years with ernst & young, finally, i'm proud to say that i was senator dan forts tax counsel for over three years. always be grateful for senator dan for the lessons i learned in the values he instilled in all of us on his staff. he set a standard for excellence in service that has been a source of inspiration my entire career. during the career opportunities i've worked on many aspects of the test code. i focused on small business and middle income individuals. my current firm is focused on middle-income opportunities. ernst & young has focused on compensation and witness firsthand the challenge of keeping american companies competitive internationally. comprehensive tax reform is a challenge before us. the current code is unnecessarily complex anti- competitive and picks winners and losers.esses ne americans need a simpler system when filing taxes. in the middle class needs a tax cut. u.s. businesses need a tax code that allows to prosper domestically. we have made great progress in identifying the policies for achieving these goals. the magnitude of the tax reform in terms of hearings, working groups and legislative proposals is impressive. as a result, america's on the verge of its first comprehensive tax code overhaul in a generation. treasury has an outstanding team of the most outstanding tax professionals in the world, working together with you and your staff i believe we can get tax reform over the finish line. if confirmed it would be an honor to strive to do so. thank you. >> thank you sir. were grateful you are willing to serve. i had some questions i will ask that i ask all nominees. first, there anything you're aware of in your background that might present a conflict of interest with the duties of the office to which you have been nominated? >> there is not. >> do know of any reasonon personal or otherwise that would in any way prevent you from fully fully and honorably discharging the responsibilities of the office to which you have been nominated. >> closer. >> do you agree without reservation to respond to any reasonable summons to appear and testify before any constituted committee of the congress if your confirmed? >> yes, sir. to commit to provide a prompt response in writing to any questions addressed to buy any senator of this committee? >> yes, mr. chairman. you have been in the tax business for many years from tax policy to tax consulting and compliance. he worked of congress and administrations, taxin practitioners, academics andnd other taxpayers. what is it that you would like to achieve as head of the tax policy at the treasury department? how have your years of experience with all facets of the tax committee prepared you to do so? >> one of the things i've learned over the years is that taxes do impact decision-makings both by individuals and businesses.ld having an internal revenue code that is fair and simple should be a high priority. having a globally competitive tax system is important for american businesses. if confirmed, i would focus on increasing economic growth for the tax code, creating good paying jobs, a middle income tax cut, and simplicity. >> i just have to say that what are some of the important things congress can do to help americans save their hard-earned time? and of course their hard-earned money as well by complying with this overly complex tax code. >> i think an internal revenue code that has a broad base with low rates. that means eliminating certain tax deductions that exist today. it would be very helpful. the taxpayer advocate is estimated the internal revenue laws exceed 4 million words. nobody can comprehend that. so i think eliminating a lot of what we have today in terms of preferences, broadening the base and lowering the rate is essential for americans to feel good about the internal revenue code.er none of us tend to trust things we don't understand. most americans have no understanding whatsoever of the tax laws and how they work. when 90% of the population either hires a tax return preparer or purchases software to prepare the returns, we have a problem. i think we need to simplify the tax laws part of tax reform. >> the trade facilitation act in 2015 requires u.s. customs and border protection agents cdp to promulgate regulations at the treasury department is responsible for approving. some of the regulations have missed their statutory deadlineh do i have your commitment to ensure that cpps regulations would adhere to statutory deadlines going forward, including the promulgation of relations necessary for simplifying drawback procedures. >> that's not an issue unfamiliar with the my personal belief is the responsibility of the executive branch is to execute faith those laws and if confirmed i would do everything in my power to make sure treasury meets its required deadline. >> you have interact with small large basis on a daily basis. what are they telling you is most important to them as part of tax reform? >> what are the major themes your hearing from large and small businesses alike?be >> larger businesses tend to be more globally active. so the focus tends to be on a globally competitive tax system including how u.s. for quarter businesses are tax. small businesses are less concerned as a general matter with the global competitiveness, they're more concerned withimplc simplicity. surpris something that surprised me most when i moved to my current per is half you businesses in the middle market have a tax professional. businesses with revenue up to $70 million have known on their staff who focuses on taxf conseq consequences of different decisions they make. so having a simple, straightforward internal revenue code for business that allows them to make decisions that make sense to them without being unduly influenced by the tax for would be a good place to be. so different concerns at different ends of the spectrum. >> thank you. the profits were shifting it was intended to address concerns associated with perceived erosion of countries tax basis the prophet shifting. isn't tended that countries wh signed on we move together on these fronts, however not long after the reports are finalistse certain countries decided to go their own ways and enact measures that would further thab those measures described in reports. for example one dealt with tax documentation that be prepared on a country by country basis and probably shared. however, there's a strong movement in some jurisdictions to make that information publice of countries collectively agree to do one thing but then go off and do another what he think is the benefit for the united states of participating in these discussions besides it attempting to achieve consensus. if you think they shouldth maintain a presence in these tax discussions, what thoughts you have on actions that can be taken for jurisdictions not to take action that's contradictory or go further than the agreed-upon frameworks? >> it's import press have a seat at the table in thesee discussions.ited sta i also think it's important for the united states to make sure those agreements we enter into are complied with. so how we would deal with each individual situation very they don't how we can have a globally competitive, international environment with a level playing field with different players play by different roles. >> thank you mr. chairman. and thank you for meeting with me. when you are director of national tax at ernst & young, you are responsible for tracking the amount of money employees at your department made for selling tax shelters that cost taxpayer billions of dollars. was your job to count the money and is a partner you benefit financially is the money in effect, poured in. you also had a hand in designing the process of designing tax opinion that allowed this. is a process that led to people going to jail and and $23 million fine, yet up until this morning, you have taken no responsibility for a very dark chapter this firm. and in effect, he said it was not my job to complain. w not my job to blow the whistle. now, it takes real courage to stand up when people around you are breaking the law. so the question i want to ask you is, in hindsight, at theea least, do you wish you had handled this matter differently? >> i was not involved in the decision to get involved in tecg shelters and i have never designed or drafted will myself. every time i think about ernst & ac young's activity i wish i had done things differently. >> what would you have done differently? you are the head of the department. this is a key question for me because this was a big ripoff s night would like to know what you would have done differently. >> at the time the firm agreed to get involved in the tax shelter business i is not the director of national tax. the firm set up a separate reporting structure which did not involve the national tax. when i took over and that wasax the system that was in place and continued until the tax shelter group was dissolved. wasn' it was not until later when i was designated as the primary point of contact for the firm with the subcommittee on investigations that i had a chance to review in detail the e-mail of that group. what i saw and greatly disappointed me and i felt members of the group at abuse the level of trust the firm have placed in them. looking back, should've been more active. i should have played a bigger role. i should've been more vocal. i spoke up when i had the opportunity but i do not speak up as forcibly as i wish i had. i feel bad about that. >> i am looking at all of theseu documents that you were cced on. not long, but lots of them. i'm going to have to consider your answer as we go forward, because when you look at whate k happened there on the fact thatt you're copied on all of this and you are the head of the department, it was a major fraud. i may need to talk to some more about this. my next question was on a matter that was very troubling to me. he said that you would respond to requests made by the committee.re however, when he spoke with these people sitting behind me, you said that if the white house tells the not to respond to democratic members, you would follow that directive and ignore our requests. so, which would it be?yo are you going to be responsive to requests from committee e democrats even if directed not to do so by the white house? or are you going to break the pledge that you have made to the committee, can't be both. has to be one of the other. >> senator, when i worked here. years ago i was brought up to believe that bipartisanship was the way in which the senate works. i still believe that today. i believe congress makes the best decisions when both parties work together. the answer that i gave to the staff those stated improperly are not as active as i should but what i meant to say and continue to believe. >> your retracting what you said to the staff. >> that's a yes or no answer? >> what i meant to say is there is a legal prohibition that prevents me from responding, that is all that will re- prevent me from responding. otherwise i intend to fully and quickly as possible respond to any inquiry of any member of this committee are senate on either side of the aisle. >> one last question if i can get it in, when i think about the tax code i think about two systems, one for cups and nurses and the other is the system that we side ernst & young where in effect, people who are fortunate and have the kind of talent that you had, to a great extent they can figure how to decide what they're going to pay and what they're going to pay it. so, what you see as your priorities to close these kind of loopholes and get us to a system that gives everybody a chance to get ahead rather thano two systems that end up being particularly hard on working families. you have some expertise here concerns and one was doing on your watch.being ha what would you do to stop those? >> first of all the activity from ernst & young is a small part in it constitutes is less than 1%. >> tax shelters are not a small part of the economy today. >> but what led to that is the complexity of the internal revenue code. it's all the great that exists within the tax law. ernst & young is not unique and tax advisors engaged in similar activity and it is the complexity that relates to that. >> my time is up. there's more than this them blaming it on complexity. this is a question about whether or not you will have the political will to take on powerful entrance that did so well that ernst & young are still out there today. >> thank you and congratulations on your nomination. ernst & my first question deals with the whole issue of whether we ought to have lower rates or expensing and which is more important. how do you see the trader between expensing and depreciation and lower rights. to you and view view it to help finance for a lower rate? >> i think different businesses would prefer different thanks.tw so professional business services would prefer the lower rate of their equipment. i think some members have had i think trying to simplify the rules for expensing and writing capital equipment would be a good thing to do. they're exceedingly complicated and i think simplify the in consolidating some of the existing would be a good thing to do. >> what if any restriction should be imposed on the ability to conduct interests. as you know the house will generally eliminates as a blue business expands to go for full expense. do you view this as an acceptable trade-off that should any restriction be considered? >> i think as part of tax reform everything should be on the table. you should look at the interest in there's concern among many the current treatment of interest leads businesses to excessive leverage.e is conce if something is done i don't think it would be wise to do it as a simple across-the-board change. i think some aspects of the economy would depend heavily on interest and it's critical tok have availability. the interested debt and their interest expense. >> a key simplification being considered as substantially increasing the standard deduction. the administration proposed while generally only maintaining deduction for charitable contributions of mortgage interest.proposle at the end of the day the increase standard deduction means only about 5% of taxpayers would itemize to take advantage of either of these remaining deductions. how should that balance the goals of simplification with the long-term goals of incentivizing and homeownership? >> as part of tax reform each tax revision needs to be viewed in a comprehensive revenue code. so looking at every provision of the tax will make sense. figuring out a new internal revenue code for the future which is simpler with lower rates would benefit the economy and all the taxpayers a great deal. >> there is a agreement that pass-through tax rates need to be with the corporate tax rate. in your view must a corporate tax rate be equal to provide a level playing field? >> i have written on the and testified before the house business committee on that. i've spent a lot of time focused on pastor businesses. when i was at the american university is on small businesses and middle income taxpayers.wht a few years ago there is discussion about eliminating a broad array of business expenses and deductions. the c and using that revenue to lower the corporate rate. my concern was many of the flow-through's are smallsinesse. businesses and so i proposed at the time that may be what we should have is a single businesa rate structure for flow-through sensing corporations. i proposed a single rate structure for all businessss entities. i realize there are problems with that. the biggest one is whether personal service income should be subject to the lower flow-through rates. that's a question that people can differ. if it's agree that it should be the lower pass-through rate than i think we need ways to prevent individuals to go to pass-through income. but i think there has to be aa realization the c corporations have two levels of tax a pastors only have one. while i would like to see the pass-through rate is low as it could be, i think you have to take into account there is a second level of tax on seed corporation that does not exist for pass-through entities. >> this essay there are not be some, what you just said in the talent is that you're giving some consideration to a lower rate for pass-through as opposed to salaries. >> are not. >> but going back to my first point, i think there's a serious question whether that lower pass-through rate should apply to personal service income. in other words, if there's a corporate attorney performing at exactly the same services as an attorney with the law firm it doesn't seem right to me that the attorney with the lafe law firm pays at a lower rate than the employee pays. >> thank you mr. chairman. we appreciate you being here and i know for the record that your was earned county native. we don't have that happen very often so it is good to see. i have some question for the record regarding the line of questioning that senator wyden pursued with regard to ernst & young. i want task in particular about the code and where we go from here. in particular i want to start with productivity in the code, how do you preserve that what reviews on that what he view that issue that's been part of the internal revenue code, think it a sound social policy. and my focus if confirmed would be on a middle income tax cut think we do seem taxes and simplifying the law encouraging economic growth, and generating good paying jobs are what i would focus on. i believe in productivity and il think it should continue to exist after tax reform. >> i hope that would be the perspective of the view of the administration that they will focus on middle-class tax cuts. i'm afraid that might not be why they share in terms of a goal. the scene over a number of years that when congress and ask substantial and sometimes i would argue grossly excessive tax cuts for the wealthy, other parts of our society pays or schools pay, research investment pay for that. cuts to nih or limitations on investment. everything from meals on wheels to programs that are now up for not just cuts but eliminationat from the administration. i hope the administration would adopt to be that the middle class should be the priority. in terms of the tax cut for the wealthy, if the administrationth tax plan is not deficit neutral, how would your tax cuts against programs and pay for it? >> my personal belief is that tax reform should be revenueevee neutral. saying that i think we should take dynamic scoring into account. but adding to the deficit as part of tax reform is not the best way to go. >> we might have a difference of opinion on dynamic score.scorin. as you know, what we have from the white house so far is a one pager. which does not tell us much but it does get broad outlines. our sense is that the proposal the administration would move forward would be a repeal of all to save free. this would resolve in an above the line deduction being repealed. so here are some examples of what that could lead to. you have a scenario repealing deductions for higher education expenses like tuition. so how is the overall tax planir making several million dollars, how is that an appropriate trade-off when it comes to a deduction that benefits those who need higher education? >> the discussion so far has been on itemized reductions in education can fall into. i think everything should be on the table is first tax reform. i would not rule anything in around. their meritorious provisions of the code. the challenge is that they create complexity. if confirmed i'll be glad to work with you and your staff on issues you are focused on. >> we could add to that list of subject areas or parts of the deduction were expenses for educators in the classroom,trave travel expenses by army reserve numbers as well as others. i will ask you one final question, can you guarantee an average there will be no absolute tax cut for the wealthy? >> i am not in a position at this point to make thaters. commitment.averag i will tell you that my focus is on the middle income taxpayer. that is why i agreed to take on this job if confirmed and i will give you my word that is my primary concern. thank you mr. chairman. >> thank you mr. chairman. and congratulations on your nomination. we had a chance to talk about how i look at tax reform and trying to best think about an information age. that obviously one of the things we want to harness is the level of innovation and continued development of new products and services. so, what you need to do to make sure as we look at tax reform we are focusing on the arrow we live in and how to best capitalize on that. we also talked about some of the challenges that comes with thatt as well. i mention two things, the apprentice program and affordable housing.af and wondered if you had a chance to talk about those two issues, one ways in which we might incentivize more rapid uptake of worker training to in some companies to hire and train as opposed to the challenges we t face today. . . so i didn't know if you had a chance to look at that. >> senator, i've not developed my thinking any further in that but if confirmed i look forward to working with you and your staff to try to develop something without make made sense. i will say, i am sympathetic to that. as someone who was a i believe in the importance of education. i am a believer that education can make a difference and the ship programs which i thank you are focused on and pioneered in your home state have made a difference in many lies and i like to see that extended spect you think the tax could be inexplicable place for the tax code given that part of our challenge is people don't know where to go and spend their time in training and were asking t people to go make an investment and changes happening in a muche more rapid fashion and people t don't know where to make the investment so we can short-circuit that by getting companies to hire and train. we've taken a lot of consternation out of the system. >> i agree. that's a serious issue for the us economy and forfor th competitiveness and i would look for to working with you to try to develop something we could put into the tax law which would not be unduly complicated and be effective and efficient to deal with that issue. >> thank you. on the affordable housing issue anymore opportunity to think about in the context of we really have a crisis in america now on affordable housing for low income housing tax credit has been a great tool. the one thing that has been missing here is the discussion on how much we've been impacted as a nation in the growth of americans on this unaffordable category that we had a shift in the context of how many americans have retired and now are in the situation looking at affordable housing, returning veterans, people who have fallen out of the economy are doing a 60% increase on the demand of people now saying i pay more than 20% of my income is for housing. >> the low income tax credit housing is not minute spent a lot of time in my career but from what i've seen it worksom pretty well and i think as part of tax reform we should take a look at whether it can be made more effective and more efficient and i think everything should be considered as part of the conference of tax reform effort and i understand the goal of low income housing tax credit and i think it is a worthwhile goal. >> in this case, what we're looking for is your feedback and maybe you can think about it and get a summary for the record is the tax credit drive 90% of the affordable housing. we don't increase it, we won't increase the supply and this is more of an analysis of the shift change in the population that is now experiencing these dire situations and whether it's a worthy investment at this point to increase the amount of capital put behind the tax code. i would put one other note into this is that the discussion in tax reform is suppressing the amount of capital. the discussion of tax form is basically hurting us in this discussion because people are sitting on their capital instead of making the necessary investments. >> senator, it may be possible that low-income housing tax credit even more effective and efficient than it is today. if confirmed, i look to working with you and your staff to accomplish that.t. >> thank you, mr. chairman. >> thank you, mr. chairman. thank you for being willing to serve in this position. i enjoyed meeting with you and visiting and learning and i appreciate your experience and are pleased that we have a nominee that understands the challenges that businesses face in this complex tax code. in fact, to even understand the tax code will probably already know that the expertise comingng through this committees have problems and there's a lot of background that can be looked at and depart. i would like to mention that president obama's assistance tax policy had these words to say about our nominee: beyond deep technical knowledge which is essential they would bring great leadership, abilities and perhaps most importantly, he would bring a calm and measured thoughtful approach to controversial issues. i can't think of higher praise that somebody could get then that coming into this position. i also noted that you talked about businesses with no financial expertise that once with 50-$60 million a year don't have a cfo and i would mention that we have a lot of agencies that don't have a cfos as well. i've noted that i want to congratulate the yellowstone park superintendent of the national park that got the chief financial officer instead ofde having a botanist check the boxn of having done that is part of his experience and i noticed inn this morning's paper that casper wyoming at the assistant manager for having a chief financial officer. it does help to have financialcu documents be looked at and have someone who can figure them out. there's a lot of people that don't have that expertise and you have worked in taxes. you have actually done them. i'm also the budget chairman and i know that our nation's unsustainable fiscal path so i appreciate your comments on the tax reform so the congressional budget office has made it clear that current laws governing taxes and spending to not change the united states will face federal budget deficits in the next two years in cbo's41 production that rises will to 86% of gdp in 2026 and 141% in 2046, exceeding the historical peak of 106% that occurred after world war ii. the prospect of such a large debt poses such a substantial risk of our nation and presentss policymakers with significant challenges. we need to take steps to reform our broken tax code to lay the foundation for long-term prosperity for all americans and as i mentioned before i've been working on international tax reform for some time so that we can be competitive overseas and if we do that something in that international area will be able to pull our international of the 21st century and make be competitive overseas and having the possibility of bringing more revenue back to the united states to be invested in american businesses. i've been working with senator portman to make that happen. from a broad perspective, can you explain what the administration believes is the appropriate way for reforming outdated international tax? >> the administration is supporting a territorial tax system and more than that, the goal of the administration is through tech support to develop a competitive international tax system. in 1986 the internal revenue code was state-of-the-art and other countries admired what we had done and we had brought a broad base with low rates and it went to school and what congress had enacted in 1986 and they have broadened their bases and lower their rates and they went a step further. in 1986 a worldwide system ofat taxation was state-of-the-art in today a terrier. system is what most of our major three partners have moved to. with a worldwide system us businesses are at a competitive disadvantage. a there are strengths and weaknesses of any system whether worldwide or whether territorial system but the fact of the matter is we are, at this point, out of step with the rest of the international community. if we don't move to a similar system, a territorial system, will be at a competitive disadvantage. >> thank you. i appreciate your background and know that a simpler less burdensome tax code will help american businesses and individuals to prosper. it's a thrill to have somebody who has handled on accounting experience.d i appreciate you making it through the tough stuff that you have to go through but i look forward to working with you. >> thank you for i call on the next senator let's make a few points here. then senator wyden will close at the hearing. it's important that we not clouk record concerning his work at ernst & young. a three state the facts. one, for nearly three decades he was a professional at ernst & young and that the committee has seen no evidence whatsoever to call the question the honesty, his integrity or his good judgment during his work there. number two the firm's taxri activities were the subject of h permanent subcommittee on investigations inquiry including hearings in a report. no part of this inquiry found any hint of wrongdoing by mr. cotter but reflect inevitably on him in any way. he has told the committee and in writing that he has no involvement in creating or promoting alleging tax shelters. we have no reason whatsoever to doubt him so i've got to leave for a meeting with the japanese ambassador but i want to thank everyone for their participation today. today's schedule was a demanding one then i want to thank everyone for their participation. mr. kautter i'd like to thank you for your professionalism and responsiveness. i hope that we can process your nomination in short order and continue the bipartisan work of this committee. so, will turn out to senator and when he is through the ranking member would like -- >> before you leave, for 30 seconds, as mr. kautter said today and it's something i'll be waiting in the days ahead he would have handled the matter of what happened at ernst & young differently. i was taken by that statement. i'd like to have more discussiod about it but i wanted to record to note. >> thank you. i think that's good for you to point out. senator soon if you'll excuse me, finish up. >> let me begin by thinking mr. kautter are beginning to appear before the committee today. we appreciate your participation in this confirmation hearing and obviously, the position to which you would ascend is one of the most important roles in executive branches as we press forward with tax form. thanks for your willingness to bring your expertise to this enormous undertaking. i want to talk about the continued growth of the so-called economy. the issue of worker classification has taken on a greater importance. historically the tax code and irs have had a bias toward classifying individuals as employees and against independent contractors but that view really does not square with the increasing number of internet platforms and how it brings people looking for the services and creating much-needed jobs in this country. i interest legislation last week to provide more certainty fore these independent entrepreneurs who were building the gig economy today. do you share my belief that we cannot afford to continue looking past the worker classification issue in the tax reform as a singular opportunity to modernize the tax code for traditional business models as well as the new models that are propelling the gig economy and whatever comes next? >> i would agree with that. the rules governing classification between employee and independent contractors have been uncertain for decades. the irs introduced a procedurest in the late '80s it was state-of-the-art for classifying and it has 20 factors. some of those factors are incomprehensible and so, i think, bringing greater clarity to classification between employees and independent contractors is an important thing to do and i think that tax reform is the right time to do it. >> if confirmed, would you work with me to address this issue as part of tax reform. >> yes, sir, i would look forward to that. >> we have a once in a generation to modernize the tax code and refocus it on athe two sustained long-term economicc growth in this country. i believe the two most powerfuls things that we can do in the tax code to achieve that goal are to lower business tax rates for both corporations and allow businesses to recover their cost of their investments as quickly as possible. both of these changes will allow companies to deploy capital and earnings into business growth, job creation, better wages rather than sending more tax revenues to washington for government spending. i have two questions one, do you agree with this view on lower business tax rates and faster cost recovery and second, do you agree that these changes will have a macroeconomic fact on tax revenues that we should take into account as we develop tax form legislation? >> yes, sir. i do believe that both of those changes would have a favorable effect on the economy and i think trying to strike the right balance between lowering the rate in changing the depreciation rules by shortening them is an insight science but i think we need to focus on both as part of tax form. both are important. >> i do too and i hope that as we get into the debate this committee and the full senate on tax reform that we will look at the macroeconomic impact in these changes, policy changes, can have on tax revenues and as we develop that legislation but recognizing, again, that lower rates, faster cost recovery of the two things we get the biggest economic gain with on the economy. >> i agree with that. >> thank you, mr. chairman. >> thank you, mr. chairman. mr. kautter do you support theoo proposition in the president's proposal to eliminate state and local tax deductions? >> senator, as part of tax reform we should look at every individual provision in the internal revenue code and i think what we do should be viewed as a conference a package so, i think every position of the code should be on the table and components of the tax refor> package are interdependent -- >> i'm asking you specifically about this one. i get the broad picture but what is your views on this one? i would say, center, it shouldld be considered -- is hard to answer that question frankly, in isolation. i think it depends on what the company is a package looks like. >> what is the purpose of the state and local property tax deduction? >> in my experience, it has been to avoid one of the theories was to avoid double taxation on the amounts paid to state and local governments. >> so, in your views of everything should be on the table should the foreign tax credit which is basically a subsidy for us corporations a bigger credit they receive against us taxes reduces revenue to the treasury and actually goes, in essence, benefiting the countries in which they are getting the deductions from. do you think that would be on the table? >> yes, sir. >> what is your views on it? >> again, i would say i would give you the same answer i gaveh you with respect to state and local tax. in isolation, i can see the benefit of a foreign tax credit and i can see the detriments of it. i think the key is how it fits into a comprehensive overall tax reform package. >> let me express to you what i've expressed now to several nominees in different forms on different committees. it's a little difficult here to vote on someone -- i understand at the end of the day that anyone nominated by the administration will ultimately pursue what the administration decide this is clear view. it's pretty clear. you will have a very significant position and you will have the ability to advocate internally at treasury and interagency process and it's hard to vote for someone about what they'll be advocating so that's a problem with your answer. many members of this committee on a bipartisan have urged the treasury department in order to encourage more overseas investment into the us commercial real estate market 40 senators cosponsored this which would have repealed the notice. these days this is an unheard level of bipartisanship. despite significant reforms that we passed in 2015 the note is still a chilling effect on investments in commercial property. it sounds investments from foreign pension funds sovereign wealth funds, regular foreign individuals who want to invest in the development of american property. since this was done as an executive action and not legislatively by congress, you, if you are confirmed, are in tht position to repeal this irs notice. will you actively review the feasibility of withdrawing this notice after you are confirmed? >> it's not an issue i focused on on my career but i would welcome the opportunity to take a close look at it and work with you and your staff. >> okay. let me ask you one last question. if you are confirmed, you would be the point president in the treasury department for tax reform which i share the views of many on the committee that is both long-overdue and desperately needed. we haven't updated it in more than 30 years so is the right thing to do. do you believe that something as important as all-encompassing as the tax reform should be done in open, transparently, for the public to see, do you believe that the finance committee to hold legislative hearings and markup something as important as tax reform. his regular order preferable than reconciliation in order to obtain long-lasting reform? >> mr. senator, i believe that congress does its best work when it works in a collaborative across the aisle manner and when i worked here years ago that was how we worked. the senator i work for, senator danforth, required every tax bill that i worked on to have a democrat senator and i thought it made the legislative stronger and better and my personal fiber and commitment to you is that if confirmed, i will do everything i can to always have an open door and to work across the aisle and to give access to both sites connect thank you. y >> thank you senator menendez. a couple additional areas, mr. kautter, to get your thoughts on. the administration seems to think that tax cuts pay for themselves not folks are there and now. do you share that view? >> senator, i believe that taxe do affect economic behavior. i have seen it. i think most economists believe that the taxes do affects economic behavior there is a wide variety of views as to what that impact is in a complex economy. i believe in dynamic scoring. >> but do tax cuts pay for themselves? the reason i'm asking is because i happen to share the view that behavior is relevant and if i remember when esther elmendorf was head of the congressional budget office and i asked him about the proposal that i had and he said yes, we will score thoughtful bipartisan proposals as generating growth in revenue. that is very different than the proposition of tax cuts paying for themselves. so, stay with this issue that, in my view, is different than saying behavior is relevant with respect to activity in the private economy. do tax cuts pay for themselves? >> i guess i would say that i've never tried to resolve that issue in its full extent but i do believe that they affect behavior and so, i don't know that they pay for themselves. i just don't know. >> if you are confirmed, my guess is that you will have to resolve that issue because certainly the people you would join seem to share that view. let me ask you, with respect to another matter that we talked about, that is who want to get the lion's share of tax relief because to me making sure that the middle class gets most of the benefits in an economy where the middle-class and consumer drive that should be the central focus tax relief. in your views should the middle-class get the lion share of the benefits from tax reform? >> i do believe the middle-class should be the focus, the primary focus of tax reform.m. yes, sir. >> i want it clear that i am not going to announce a cotter rule because we have had the experience of having mr. minutia in a brace the rule and i will hold it to you. that is what we talked about in the office and i think that is the clear reality. i don't know of any other place that you can go to drive the kind of growth that we want without zeroing in on the middle class. you're being spared having the cotter rule in the middle-class ought to get the benefit. >> i'm grateful for your forbearance. >> we will hold you to the facts that the middle-class ought to be, in your words, the focus of tax relief which frankly is not what we saw in the campaign. in the campaign we saw frederick but when you start adding up th numbers it looked like most of the relief went to the fortunate few and then we have this one-page proposal which i call shorter than the typical drugstore receipt where it'sed very detailed with respect to the fortunate few and not very detailed with respect to the. middle-class. anything else you'd like to add. >> i'd like to express my gratitude again. i will say probably in closing, some of the work that you and your staff have done over theea years as some of the most creative and thoughtful work and if confirmed, i would genuinely look forward to working with you and your staff. >> i appreciate that. we will have some more things to talk about in terms of discussion today but i appreciate you saying that not just because i think that juddnk gregg and dan coats and these are real legislators who felt strongly about this and wanted to spend the time. if confirmed, you'll be going in there and playing catch-up ballo because the reality is in the 86 tax reform and i often talk about. with bill bradley about this in this time of the year they had a very extensive bipartisan effort underway where they were regularly bringing together democrats and republicans and there had been a judgment that had been made that there would be a bipartisan bill and that it had to be bipartisan and reflects the comment you made about jack danforth who i also liked very much and feel strongly about that. here we are sitting in july and senator mccaskill is saying when will there be bipartisane bipart discussion and when you open up the wall street journal last week it basically had all of the described big six making all the tax decisions but the reality is you can probably find some opportunities to bully your way to a 51 vote strategy with reconciliation and it doesn't make it sustainable and in case of the area you want to work in it won't bring certainty and predictability we need for real growth because what will happen is if it's a partisan bill everyone will say that will turn around, get repealed the next time someone else is in the majority. to get the certainty and predictability that we need for a private-sector growth it has to be bipartisan and it's got a focus on the middle-class and ending this tale of two tax codes as i call it because something is way out of whack when the cop and the nurse have their taxes taken in a compulsory way and people who are fortunate get handled very differently. on behalf of chairman hatch, i want to make it clear for the record that on either side of the aisle that we are written quest questions for the record that they would be submitted by close of business today and with that, the hearing is adjourned. [inaudible conversations] [inaudible conversations] >> tonight on c-span2, a discussion with author sam quinones about opioid addiction in the us and his book, tonight. from the atlantic council a look at venezuela's humanitarian and political crisis. then the senate compensation for present from 70 from the federals mitigation commission. a later a discussion about trump and ministration policies on international trade. sam quinones is the author of dreamland about opioid abuse and the form of mexican compels creating the problem. we talked him on washington journal. this is an hour. >> sam quinones is the author of dreamland: the true story of america's opiate epidemic. he joins us today as we return