Congressman with us today. Because in this role, he will no doubt be playing an Important Role in the effort to develop, debate and pass fundamental tax reform. In his iraremarks today, he wil discuss three main goals. That is reform should fuel job creation and deliver opportunity for all americans. It should sitsimplify the tax code to make it fair and burdensome and refocus on its customers, the american people. It is my hope that members of the house and the senate will follow the lead of our guest and join his work and his consistent with his goals. Ladies and gentlemen, please join me in welcoming guest. Well, its great to be with you today and thank you very much for the honor of spending some time at the Heritage Foundation. Im joined by my wife, elizabeth and they, she was telling stories as we woke up, walked here, that 30 years ago when they came, they were serving coarse bee coors beer, but not necessarily in the middle of the day. Well look for that later. I went to china and if youre an american policymaker and you go to china, you get a bunch of briefings before you go and people tell you how great china is. They tell you all of these different things, so i went and came back and i came to a different conclusion. A conclusion i came to was weve got challenges. What are chinas troubles . Theyve got a demographic problem. Their one child policy is out of sync. Too many boys who have been raised by six parents, two parents, four grandparents and those of you who are fathers of sons, you know that doesnt end well particularly when youve got a whole culture. To fete one star in the chine chinese they bit off more than they can chew in the south china sea. They cant control the peninsula. At the prospect of a nuclear peninsula with kim jongun being so aggressive. Theyre on the verge of a personality cult with president xi and the pollution literally took my breath away. I couldnt even believe how ip credible it was. So i flew back and i landed in chicagoland and i met Ohare Airport and im having one of those pope kiss the tarmac kind of moments. I came back and i thought, this place is great. I love this country. And we have so much opportunity heefr here. Its simply amazing o. Kay, so, whats the nature of what we have going on, but what are the challenges that we have . Heres nature of part of what we have going on. Weve got an economic mill u that is innovative and dynamic. And restless. And aggressive. We have an economic culture in this county that is completely unique. If somebody this is something and fail, we dont characterize them as losers. We say, how charm, how nice for you. Youre in fourth paragraph of your Fortune Magazine feature story. We love the idea of somebody going out and trying something, fails, tries something, fail, then succeeds. All of these things work to our benefit. But i said weve got a challenge, so what are some of our challenges . Well, were here today to talk about one of them. Thats our tax code. Our tax code is not working for us anymore. Our tax code was created in 1986 as we know and weve got an opportunity now to e reflect back on that. Let me do a freeze frame discussion. The election in november, nationally, the monday after the election in november, we came out to the house of representatives, obviously. I interacted with a number of democratic cleels. They were thunder struck. Thunder struck. They couldnt believe that they had lost the election to donald trump. They were thunder struck. Almost to the point of disorientation. When something jarring like that happen to you, whats the smart thing to do . Reflect. Contemplation. And move forward. In my opinion, democrats are not reflecting, theyre reacting. Theyre sort of doubling down. Thats their problem, thats not our problem right now. But it is a word to us. In other words, its what to avoid. We need to reflect on the fact our tax code is not working for us anymore. My home state of illinois is an example of avoidance behavior that gets out of control. So, by avoiding one problem after another problem after another problem, over a period of time, illinois has fallen into this economic crisis that everybody here is familiar with. Right, lets not do that. Lets recognize the nature of the debate right now. Lets reflect on it and lets look at it as an opportunity, so go back to 1986. Just to put this into context, the bears won the super bowl. Ferris buehler was out. Sadly, that was the year of the chernobyl incident. The challenger disaster. Its been a long time ago and yet, thats the duration of our current tax code. What has happened in the past 30 years from an economic point of view . The entire digital economy. None of which existed essential ly back in 1986. What else . The Global Nature of the economy. There has been a mund mental shift in terms of integration, so weve got to reflect back and say this is our time. Now, i am absolutely convinced that we are at a national Inflection Point as it relates to tax reform. We are at a national Inflection Point. What do i mean . Theres three key things that are driving this. First is theres nobody that is depending the status quo. Nobody. There is no voice, no person, no entity out there today saying you know what, the u. S. Tax code is is great. Just leave it alone. Nobody. Now, theres people this like some element of the tax code, clearly. But nobody in its entirety is communicating that they like it the way it is. Trz what are some of the things they dont like about it . They dont like the complexity. So think about this. I have an expectation and a desire for simplicity that rivals all of your desires for simplicity. You can act like youre above me. Youre not. Were all in this together. We want simple, quick, easy, fast things. So think about this. I have an expectation. Not a hope. I have an expectation that i can go on my iphone, i can click on my airlines app using two thumbs, by the way, click on o a flikt, a seat, an b e ticket and get a boarding pass sent to me within the twinkle of an eye. I expect that. I desire that level of simplicity. I dont want to be on the with a travel agent. You take my point ft we have a real interest in simplicity. So the fact that nobody is defending the status quo and simplicity is is part of that. The other thing i think were at a national Inflection Point is the fact that the shine is come pleas ly off the penny of the Internal Revenue service. Let me take you back to a story from the last congress. Theres a couple named mr. And mrs. Sours, Dairy Farmers from maryland and they got into the Farmers Market business, which is a cash business. They were sold by their bank tell teller, its a big hassle because when you do, weve got to make a report to the federal government. Would you mind not coming up with 10,000 at time because thats the threshold. Would you mind coming in with less money. They said sure. Well, upon reflection, that was a bad idea because thats a felony. Thats called structurstructuri. They were structuring their deposits so as to avoid a reporting requirement. To collapse this story down in the spres of time. The irs got wind of this and essentially went in and shut down mr. And mrs. Sours operation. They did a civil asset forfeitture stuck them in the midst of a k arafka novel. They couldnt figure out what was going on. They go to the bank. They say you cant do anything. Your deposits are being seized by the Internal Revenue service. Over a period of time, interewe able to get the commissioner of the Internal Revenue u service to issue a public apology, which was like birthing a cal f byf by the way in getting that done and weve been able to change some of the statutes and rules and return some of this money to similarly situated people. But you take my point. Youve got to Enforcement Agency of the tax code, who 20 year aegs, quarter century ago, may have enjoyed a reputation of tough but fair. Pay your taxes. Dont mess around with those guys and everythings okay. They dont have that today. I think its part of the national tax reform. These inversions are now continuing to happen. Base erosion is really, really significant. And wring our hands and get fretful and ainge about it. Is really foolish in my view. We had congress coming up with with base erosion rules, these boxes and earnings strippings and this, that and the other thing. None of which we could really turn the crank on to make them particularly sa lly satisfying. The Obama Administration came up with their approach, which was really, really concern, these 385 regulations, recharacterizing debt and equity, upsetting 40 years of treasury doctrine so to speak and rule making. And thats not going to be and i think the analogy that i came up with so simple. The its like look, we are trying to fix this leaky basement and were patching here and there and finally, it just dawns upon you, weve got to fill in whole thing in and move away from this model entirely and i think thats really where we are. So, some of these inversions, johns controls. Going from florida to canada. Verizon farm in illinois. Going to ireland. Aeon leaving illinois and going to the u. K. These are Companies Going where . Not necessarily to a quote tax haven. Theyre going to places going to close allies and friends in our commercial ark tchitecture so t speak. I had the chance a couple of years ago to meet naton stick with me. Like a seinfeld episode. On a trip to jerusalem. If you dont know him, he was one of the jewish in the soviet era. Spent nine years. And he had, i had heard a story that had been attributed to him and during the course, wanted to ask him, tell me, is this story true . Here is what i heard. When he was, of reagans speech, hes in the and he hears Ronald Reagans speech where he calls out the soviet union as the evil empire and the story i heard was it had a profound impact on him and everybody in the gulan, both prisoners and dpards alike, why. That the president was calling it something it was for them a forshadowing of the beginning of the end. When there was clarity about what was being discuss ued, it had a profound impact. When i had a visit with reagan in the oval office, he described this and told president reagan this. At that point, reagan calls in his staff and said probably the saf staffers that told him dont put it in the speech, its too konz verse yal. This is the value of naming things, the value of reflecting and this is the value of o recognizing where we are. Weve got a tax code that doesnt work. It will continue and exacerbate itself. And so now, here we come and weve got a blueprint. A collapsing window of opportunity right now to get this done. Weve got a speaker of the house in paul ryan who is going to create as much legislative space as possible. Hes going to create as much space and opportunity as is entire pli possible. Its not for the faint of heart. So when i first got on the committee, i called james baker of james baker fame. Because talking about tax reform, im going to call the one person who was in middle of it all. At the end of the phone call, he said something that i havent forgotten. He used everything he had as reagan, he used every tool he had at the white house. He used every tool at the treasurety department. So when i say this is not for the faint of heart, this is not for the faint of heart, so the ebb and flow of this discussion is going to continue and well hear stories. Its to recognize that status quo is simply unsustain bable. So youre familiar with the blueprint. With this document. All across the country for people to engage. They feel like nobodys listening, if they dont have an opportunity to get their word in, then the system, the process would seize up and it would collapse in on itself. So i am really pleased at the pace with with which chairman brady has been moving things. The blueprint was articulated in july. Again, a great deal of momentum. Beginning in november. Obviously with the election and then moving forward, its been the point of a focal point of conversation, not just at our retreat, but obviously with the Trump Administration and particularly with the public at large. I represent suburban chicago. And suburban chicago, there are any number of first, second, Third Generation companies that are small subchapteresque Manufacturing Companies and one of the things i have heard time and time again from them is the difficulty that they have from an International Point of view. And this is where the blueprint is trying to speak directly to that. So, we have also stipulated that we want to enhance a Manufacturing Base in this country. Weve all recognized that we need this to be revenue neutral over the course of the past six years with the budgets that the house has passed, we have publicly debated and litigated and persuaded the country that debt is a serious issue and 20 trillion of debt is a serious issue. Tried to come at this in a fresh way by shedding ourselves from just the static scoring that defies logic, but instead, have said lets look at this on a dynamic basis to make sure we get a real world burden to make its a real world evaluation. But the idea is create a revenue neutral, pro growth, simplified tax code. And my prediction is this. That the more people look at different alternatives, the more they explore things, the more they chew on different choices, i think theyll come down and say the elements and the architecture and the structure of the blueprint is the best way to go. The back story quickly on border adjustability is focus we need to focus in on. Largely every other economy in the world has adjusted their borders. When border majority was first allowed on Global Trading scene, whats happened . Over a period of time, like a lot of other tax liabilities, the vat has grown. And so, the adjustment then, which is a disadvantage to us, has grown as well. So as we know, the United States is the only country of significance that has a double tax essentially. On the one hand, we tax and the cost of a manufactured good in the United States is cooked into the income tax. And then its also taxed as, goes into a foreign jurisdiction and by contrast, the foreign jurisdiction, they have their tax removed and its not taxed when it comes in here. So, these things are all when youre the biggest, strongest economy in the world, you can endure a lot of pain and missteps. And i think weve been able to endure those things in the past and basically muscle through them, but im telling you, those days are gone. And what we need to do is heed these signals. These companies that are leaving, theyre not leaving based on a natural disaster. This is not as if theres a hurricane. Its not as if its a flood, a catastrophe that cant be mitigated. These are all rules that have been created and if they are rules that have been created, they are rules that can be recreated. So let me just close. By making one point. And thats this. There is a disposition and i think ab attitude that we need to embody. One u of the stants of one of the Church Fathers was st. Ambrose and in the context of his faith, he has attributed this theme. He said we dont impose on the world, we impose a more excellent will. We dont impose, we propoed a more excellent way. I think the blueprint is a proposal. Its a concept that says lets recognize that the status quo is not working for us. We need to move quickly, we dont want to trip up all over ourselves. Im very upbeat around this. I think theres a real, real opportunity. Most important lyric going to be celebrating the type of growth that americans are really, really hungry for. So thank you very much and id be happy to try and answer easy questions that make me look good. No. Happy to try and respond. Thank you very much. Questions. Yes, sir. [ inaudible ] yes, sir. That is one of the thresholds, one of the absolute foundation ss the repeal of the death tax. Yes, sir. [ inaudible ] you mentioned in the beginning of your speech, structu structuring, how thats a crime. Are you telling us that congress is going to actually address the criminal code that helps us make deposits within an income tax bill. They are two separate issues. Tres a acceseparate piece o legislation that we move through the house, got close in the senate that would deal with the strucki structuring issue as it relates to the Internal Revenue code. That would not be product tax reform. Ill be reintroducing it, but these are two different things. The reason i brought it to everyones attention, that the neiature of the application of that statute was too aggressive. I told the irs officials when we were having a hear ong this and in subsequent conversations, youre like in les miz, the guy nobody likes, what are you doing. About how this and working for a Manufacturing Company whos based in the United States. We look at this and might be the best place to serve the customer. What do you think about other factions and looking at and are concerned about. I had a decision with a ceo of one of the companies thats concern about this and he laid out a number of of concerns and i said, nobody wants those terrible things to happen. So, lets move forward on this basis. First of all, we think that the currencies are going to adjust and youre familiar with that. Its interesting, some of the original opponents said currencies are never going to adjust. Now, theyve shifted some of those folks and they say were concern ed about the timing of currency adjustments. Okay, thats different. Thats good. So, let us work with you on transition rules. But i kind of turned the discussion back on the executive and i said, how is is it now that we have a tax code where so many of your suppliers are overseas. Help us in terms of transition, in terms of understanding the nature of the contracts that you have. And work with the committee to give us the type of input so we can get so you have stronger, more robust and dynamic supply lines. So, i think that i mean, he didnt walk away and say, oh, peter, great, im all for you. But in terms of our disposition and our attitude, we want to be having significant input from retailers in particular, from t