Transcripts For CSPAN3 House Ways Means Tax Reform Markup 20171106

Test of the microphone. Today, the first and oldest committee in congress, the committee on ways and means, begins consideration of the tax cuts and jobs act. Historic legislation to bring lasting tax relief to workers, to families, and to our job creators throughout this nation. Before we begin, we all recognize the terrible tragedy, the shooting at First Baptist church in sutherland springs, texas. All our hearts are heavy. Our prayers go out to the families and the loved ones, the t 26 victims as well as the ten texans fighting for their lives as we convene today. Our prayers are with you. It has been more than three decades since americas tax code was reformed under president Ronald Reagan. It was the most sweeping overhaul in american history. Today, we face a monumental challenge of our own, coming together to fix a tax code that has become just as broken, complex, and unfair as the one Ronald Reagan and congress overhauled in 1986. Our journey to a tax code built for the growth of jobs and paychecks that leap frogs america back into the lead worldwide has been a long one. Our committee is dedicated a substantial amount of time, energy, and work in the pursuit of one landmark goal, delivering comprehensive tax reform to the American People. Weve held over 40 hearings on nearly every aspect of our tax law, the helpful, harmful, and horrendous. We had three Different Committee chairmans. And over this time, we have engaged in substantive discussion with nearly 60 Different Committee members, republicans and democrats, men and women, progressives and conservatives. All of our efforts have led to this moment. This one moment. Committee action on the tax cuts and jobs act. Today, we stand on the doorstep of delivering the most sweeping tax overhaul in more than 30 years. But make no mistake, this day and this historic legislation is not about us. Its about providing long overdue relief to american workers, families, and job creators. Making americas economy stronger than ever by delivering more jobs, fairer taxes, and bigger paychecks across this nation. Under the tax cuts and jobs act, the middleincome family of four making 59,000 per year will see a tax cut of nearly 1,200. That means you get to keep more of what you earn to spend and save and invest however you see fit. And under this bill, were also going to get jobs and paychecks growing again. According to the independent estimates from nonpartisan tax foundation, the tax cuts and jobs act will lead to nearly 4 higher gdp over the long term. It will increase wages by over 3 and boost aftertax incomes by more than 4 . And this bill will create nearly a million fulltime american jobs across this country. Heres exactly what this means for the American People. It means middleincome families will see their aftertax incomes go up an average of roughly 2,600 nationwide. From coast to coast, the era of stagnant wages is over. In california, middleincome families will get an estimated boost to their paycheck of more than 2,900. For my constituents in texas, more than 2,500. In new york, over 2,700. This growth of jobs and paychecks comes directly from the bold reforms included in the tax cuts and jobs act. Under this bill, we deliver the lowest tax rates in modern history for American Businesses of all sizes. We take strong action to stop american jobs from moving overseas, and at the same time, unleash investment right here in our community. We give American Businesses and workers a tax code that will help them to compete and win anywhere in the world, but especially here at home. From top to bottom, the tax cuts and jobs act is the most transformational tax reform bill since president reagan reformed the code in 1986. But for me, this bill is far more than a collection of progrowth tax policies. This is a restoration of basic freedoms that all americans deserve, but only special interests now get to enjoy under todays broken tax code. This is freedom from a tax code so complex that for everyday americans, you have to spend hours or days on filing your taxes. Were seeking a tax code so fair and simple, 9 out of 10 americans will be able to file their taxes using a simple postcard file system. Can you imagine a tax code where each of us knows what each others deductions are because we have exactly the same ones . This is liberation from high tax rates that punish hardworking americans while Washington Special interests get a pass. And its permanent relief from having to navigate and rely on a maze of credit deductions just to reclaim income that was rightfully yours in the first place. This bill is more than just fundamental reform. Its a fundamental departure from a tax system of special interests, by special interests, and for special interests. With this bill, there will be real simplicity, real fairness, and real freedom for every american. In closing, i want to thank every member of this committee on both sides of the aisle who have contributed to making this day possible. I could not be more proud to be here with you. I can only hope for spirit of bipartisanship over the days ahead. I also know that 435 members of the house have great ideas. And some had priorities that are not ultimately included in this bill. Let me assure you, this is the beginning of the tax reform process. We intend to work to improve this bill at every step in the process. And i continue to welcome your input. I can also assure you this is not the last tax markup the ways and Means Committee will ever hold. I look forward to working with all of you on additional policies to help our families and grow our economy. Having said that, this is our moment to make transformational tax reform a reality for the American People. Lets seize it in a bold way that they deserve. At this time, i recognize the Ranking Member for any opening comments he might have. Mr. Neal. Thank you, we share the sympathy on behalf of the victims you offered in texas. The bill before us is a bad day for millions of americans, particularly those in the middle class. The legislation which was crafted solely by the Majority Party behind closed doors and which was not made public until late last week puts the wellconnected first while forcing millions of American Families to watch as their taxes will go up. Thats not what the American People asked us to do, and its not something that we intend as democrats to support. In 2001, republicans offered a tax cut of 1. 3 trillion. In 2003, republicans offered a tax cut of an additional 1 trillion, and in 2005, they offered a repatriation tax holiday. Each time they promised job growth. However, they took us to the casino each time without a win. So why do we think that well have a win with this proposal . Their offering today is based on the following premise maybe. Maybe there will be 3 growth. Maybe there will be 3. 5 growth. Maybe there will be more investment. But we can also say based on the three examples i just cited, maybe not. We have a million new veterans we need to care for, and our military is committed around the world, and we cant afford another gamble. Since my first day as Ranking Member, i have called upon our colleagues here to worth together on real reform for real people. I agree with my republican colleagues that our tax system is far too complicated, contained far too many loopholes and holds back American Businesses from kim pecompetinge global economy, however, i do not believe we should give more benefits to the well off with the hope it might trickle down. Theres not a single mainstream respected economist in this country who will argue that tax cuts pay for themselves. History has proven it does not work. The last time the house worked on a successful tax reform measure, as cited, the process was indeed quite different. The tax reform bill in 1986 was written in a bipartisan manner from start to finish. It unfolded over years starting in 82, with countless opportunities to examine the legislation and to make substantial changes. That included 30 hearings on the bill and testimony from 450 witnesses. A markup alone lasted for 26 days. This is a missed opportunity. I truly believe that instead of the closed process that the republicans used in developing this legislation, if we instead worked together on a bipartisan basis, which included an open debate, we would have and could have developed a bill that was better for our economy, American Business, and indeed middleclass families. There are things that everyone on this dais can agree on. President obama noted and off offered to change the corporate rate. This could be negotiated. We need a tax code that is far less complex and a tax system that encourages innovation and growth. That should have been the starting point for good faith bipartisan negotiations. The middle class in america, theyre struggling. For years, they have watched as their wages would stagnate and their hours were cut, and it was my hope in passing tax reform that we might take those americans into consideration in making a tax code founded on fairness. This legislation marks people down at every steps of their lives from birth to retirement, fails to provide the needed improvements that could assist a hopeful young family in trying to keep their head above water, the student trying to do the right thing by getting an education, the factory worker at the end of a long career just hoping to have enough dignity in which to retire. We believe that instead of pulling down the ladder of opportunity for those in the middle class, and the millions who aspire to it, we should be expanding that opportunity to make sure everyone has a fair shot. Legislation is flawed. It will hurt the teacher who spends his own money to buy School Supplies for their students. Young parents who want to know the joy of adopting a child, students trying to responsibly pay back their Student Loans. The wife trying to afford her husbands alzheimers care, and the janitor who wants to retire with dignity so he can spoil his or her grandchildren. Let me remind my colleagues, the consideration that we have today also just a week ago was going to go after americas Retirement Savings plans to offset the tax cuts they proposed. And eventually, ill remind all, that if this doesnt work, well be back to those very issues and include medicare and Social Security as well. I worry that this impact will have a huge influence on our housing market. The skills tax benefit of buying a new home, it will lead to lower home values and eliminates the new market credit, which are issues i have champions during my career. Thats why groups like the National Association of Home Builders oppose this legislation. Mr. Chairman, we can no longer accept the status quo. I hope well have an opportunity to make america rich and richer and create more opportunity for all. We cannot afford to only care about deficits when theres a democratic president , including bill clinton and barack obama. I hope at this time, mr. Chairman, that we can set aside this bill and start again in a bipartisan manner for a new approach to tax reform that provides real reform to real people and gets the economy growing again. Thank you. Thank you, mr. Neal. Before we get started with consideration of hr1, i would like to announce that pursuant to Committee Rule 19, votes on any amendment in which a recorded vote is requested. Ill try to give members an ample chance. Well proceed to consideration of hr1, the tax cuts and jobs act. It will be considered and read and open for amendment at any point. At this time, i offer an amendment which was distributed in advance along with the green sheet explaining. Without objection, the amendment shall we considered as read, open for amendment at any point, and consider base tax for purpose of amendment. Ill now turn to the chief of staff of the joint committee on taxation to provide the technical description of the amendment and the nature of the substitute. I would ask members hold their questions until after his presentation. Mr. Chairman . I would respectfully offer a motion pursuant to clause 4a of the house rules, moving to postpone consideration of this bill until next tuesday, november 14th, and would ask respectfully to be heard on my motion for five minutes. Yes, sir, i know you feel the American Public has waited 31 years for this day. I know you feel passionate about it, so the gentleman is recognized to speak. I felt passionately about it once before. We have a history on this. The last time that i asked for this committee to give us just one additional week to give thoughtful evaluation to major legislation, that motion was defeated by the majority and the majority adopted a bill that President Trump himself declared was a mean bill, to use his words. And certainly, the president was correct. The House Health Care repeal taking away coverage from millions of people was mean. Very mean. But i believe today with this legislation, youve gone much further, and that the damage that would be done to our economy and to our families is much more far reaching. The motion that im presenting at this time requests simply that we reconvene next tuesday after you have had an opportunity to notice the first public hearing on this bill in its history. Our objective is insight, not delay. Incredibly, for this legislation of such magnitude, after so many years, as you indicate, this plan has never had a single public hearing. Nor does any member of the Trump Administration have the courage to come and sit at that desk and answer questions about this bill. Indeed, no Expert Witness has been given the opportunity to explain this bills deficiencies, nor much is with the rush to get a bill approved on Health Care Without a cbo score has there been an opportunity for thorough independent evaluation in the rush to justice over one weekend that we have had this bill. I dont know of a time in the history of this committee when it has ever attempted to enact legislation of such breadth with such shallow analysis. And of course, despite our efforts, we still lack the tax returns of President Trump and his 500plus entities that might show how he and his family will personally benefit. If that were not enough, we have a new and Unexpected Development yesterday. And that is thanks to a free press and investigative journalism, the release of the first information about the Paradise Papers concerning offshore tax avoidance in bermuda and other island tax havens. These are explosive revelations that once again sound the alarm about the inequities of our tax system and disturbing amounts of tax avoidance. When the privilege avoid their taxes in bermuda or the caymans or somewhere else, its individuals and Small Businesses and domestic businesses that end up having to pick up the tab. I sense the Panama Papers were released about similar avoidance last year. We have tried on several occasions to get this committee or the subcommittee to take action, including investigatory hearings. Unfortunately, we have been denied that opportunity. These new reports from yesterday raise new questions about a number of trump allies, his billionaire buddies, and multinational corporations that have so much to gain from todays bill. Clearly, they wont be submitting their taxes on a postcard. They may be submitted their taxes in a way that allows them even more tax avoidance than today. I think, for example, of the data that shows that last year, last year, 18 times as much money was reported as profits in bermuda by american corporations than the entire Gross Domestic Product of the country. Trumps top economic adviser, who has been the apparent white house lead on this bill, gary cohn, according to one of the reporters who presented this information, has been the president of so many offshore firms that they barely fit on the new graphic explaining this, and having mr. Offshore involved in writing this new International Corporate tax provision, gives us good reason to explore in at least one public hearing whether this bill is just creating new loopholes or is really creating jobs only for tax attorneys and cpas. Mr. Chairman, i would just say that like the rushed through trump immigration policy, the Health Care Repeal disaster, we need to learn from this experience, that this bill needs some vetting, and the president s word, it needs extreme vetting. To find out all aspects of it. If you dont have anything to hide further about this bill, a week and one public hearing will not impair your efforts. It will afford an opportunity for the American People to understand, trust me, it will be great, just isnt a plan. We cannot afford to trust this bill when no administration witness will come before the committee. I thank you for your consideration. Thank you. Move to postpone. Thank you. The questions on the motion to postpone. Those in favor, say aye. Those opposed, no. The noes have it. On that, i would request a recorded vote. Recorded vote is requested. Clerk please call the roll. Mr. Johnson. Mr. Johnson, no. Mr. Nunes, mr. Nunes, no. Mr. Teaberry. Mr. Teaberry, no. Mr. Reichert, mr. Reichert, no. Mr. Roskam, mr. Roskam no. Mr. Buchanan. Mr. Buchanan, no. Mr. Smith of nebraska. Mr. Smith, no. Mr. Jenkins. Ms. Jenkins, no. Mr. Paulson. Mr. Paulson, no. Mr. Marchant. Mr. Marchant, no. Ms. Black. Ms. Black, no. Mr. Reed. Mr. Reed, no. Mr. Kelly. Mr. Kelly, no. Mr. Renacci. Mr. Renacci, no. Mr. Meehan, no. Ms. Noem, no. Mr. Smith of missouri, mr. Smith, no. Mr. Rice. Mr. Rice, no. Mr. Schweigert. Mr. Schweigert, no. Mr. Curbelo, mr. Curbelo, no. Mr. Bishop. Mr. Bishop, no. Mr. Neal. Mr. Neal, yes. Mr. Levin. Yes. Mr. Lewis. Mr. Lewis, yes. Mr. Doggett. Mr. Doggett, aye. Mr. Thompson, mr. Thompson, aye. Mr. Larson. Mr. Larson, yes. Mr. Blumenauer. Mr. Blumenauer, aye. Mr. Kind, mr. Kind, aye. Mr. Pascrell. Mr. Pascrell, yes. Mr. Crowelly. Mr. Crowley, aye. Mr. Davis, mr. Davis, aye. Ms. Sanchez. Ms. Sanchez, aye. Mr. Higgins. Mr. Higgins, yes. Mr. Sewell. Ms. Sewell, yes. Ms. Delbene. Ms. Delbene, aye. Ms. Chu, ms. Chu, aye. Chairman brady. Chairman brady, no. Mr. Chairman. Record the vote. 16 ayes. 24 nays. The motion to postpone is not agreed to. Youre recognized for a technical description of the amendment. Again, i asked our members hold their questions until after his presentation. Thank you, mr. Chairman. And members of the committee. You have before you several documents prepared by the staff of the joint committee on taxation, jcx50 which describes the underlying legislation, and jcx48 describing the modifications made in the amendment. You also have supplemental information. Our revenue analysis and distribution analysis. There are many changes in this legislation, and i will try to give an overview of a number of the important points. On the individual income tax, hr1 would change our system to provide that there be four tax brackets of 12 , 25 , 35 , and 39. 6 , applicable to ordinary income. In general, the tax rate applicable to Capital Gains and qualified Dividend Income would remain unchanged. Another significant change is that the legislation would nearly double the standard deduction to be effective in 2018 for married joint filers. 24,500 head of household, 18,300. Personal exemptions would be repealed. The alternative minimum income tax for individuals would be repealed. In addition to the rate schedule that i described above, the legislation would provide a special maximum rate applicable to income earned by certain passthrough business entities such as partnerships, scorporations, sole proprietorships. This maximum rate would be a rate of tw25 . It would apply to the proinvestigation of professional services. It would not apply to financial services. The maximum rate would apply after a safe harbor calculation in which a taxpayer calculates their income as they otherwise would under present law, 70 of which would then be deemed treated as labor income and taxed at ordinary income rates and 30 would be deemed as capital source income and taxed at the maximum rate of 25 . This provision would also allow taxpayers whose circumstances may warrant it to prove out of that safe harbor. In addition, a significant change made by the legislation is that it increases the present law Child Tax Credit, expands it to a value of 1,600. And in addition, creates a separate tax credit for the taxpayer, the taxpayers spouse, and nonchild dependents, individuals who would be nonchild dependents under present law. That separate credit is a value of 300, and i should note that under hr1, that separate credit expires after five years. The legislation also modifies the American Opportunity tax credit and section 529, education savings plans. While repealing several other education provisions of present law. In terms of deductions, it retains an itemized deduction for mortgage interest, although modifying the deduction so its applicable for new mortgage, in the cases, new mortgages not in excess of 500,000 initial mortgage amount. Would deny the Interest Deduction of present law for home equity loans and for second homes. Retains the itemized deduction for charitable contributions, retains the itemized deduction for real estate profit taxes, although capping its value at 10,000. In general, the other itemized deductions would be repealed under the legislation, as would be a number of exclusions and above the line deductions provided by present law. The legislation would double the present law exemption equivalent amount of the estate and gift taxes. Under present law, approximately in this year, that exemption amount is worth just under 5. 5 million. The doubling would make the exemption amount approximately 11 million. That would apply to individuals who die before 2024. After 2023, the estate and Generation Skipping taxes would be repealed and the gift tax, which would be retained, would be modified to have its rate reduced from 40 to 35 . With respect to business income and business taxpayers, the Corporate Tax rate would be lowered from its present law statutory rate of 35 to 20 . The alternative minimum income tax applicable to corporations would be repealed. Bonus depreciation under present law would be expanded to instead of a 50 first year deduction, it would be a 100 first year deduction. That would be applicable to through the year for property Placement Service through 2022. Section 179 expensing, which under present law permits amounts by qualified businesses of up to 500,000 to be expensed, that limitation would be expanded to 5 million. That provision also would be applicable through property placed in service through calendar year 2022. The legislation would expand certain Small Business relief such as relief from accrual accounting methods and certain inventory methods for any business that has annual gross receipts of 25 million or less. The legislation would place a new limitation on net interest expense that may be claimed by Business Enterprises of any type. The limitation would generally apply only to interest that is in excess of 30 of the business entitys adjusted taxable income. Theres an exception for Real Estate Enterprises and for Small Businesses. The legislation would repeal the existing section 199 Domestic Production activities deduction. It would repeal pretty much all business credits retaining the research credit, retaining the lowincome housing tax credit. The legislation would terminate the authority to issue private activity tax exempt bonds and it would repeal advanced refunding of all tax exempt bonds. It would modify the calculation of Life Insurance Company Reserves and it would modify certain discount rules for property and casualty reserves. With respect to cross border Business Enterprises and investment, the legislation would provide a 100 dividend exemption system that is it would convert the present law worldwide tax system to a territorial tax system. This is, as only applicable to active income. The safeguards in terms of passive income would generally be retained. In connection with the change from a worldwide tax system to a territorial tax system, theres a provision that for transition of deemed repatriation of earned offshore that have been untaxed, unrepatriated. Hr1 also provides certain base erosion protections. It provides a new interest stripping rule, which changes present law to look at a comparison of interest expense relative to income in the United States compared to interest expense relative to worldwide income of Multinational Enterprises. It would create a regime that would include certain defined highreturn income as part of a subpart f inclusion at half the ordinary rate. What that means is defined high return income, there would be current taxation at effectively a 10 tax rate. And in addition, it would provide an election to certain taxpayers of related to i should back up. Forgive me for the stumble. In the case of taxpayers who have greater than 100 million annually, in crossborder related party payments, it would impose either an excise tax on those payments or let those taxpayers elect to be taxed as if they had effectively connected income. That would mean that they could elect to be taxed on a net basis for certain foreign costs are allocated to the income thats earned in the United States. Legislation would also make several changes to rules applicable to tax exempt organizations. Mr. Chairman, that provides sort of my high level overview of the many significant changes proposed by hr1. I would be happy to answer any questions that the members might have or more details or further explanation. Thank you. Are there any questions . Mr. Neal, youre recognized. Thank you, mr. Chairman. Could you please describe the distribution table you provided to us on the bill that were acting on today . Yes, mr. Neal. The distribution analysis that we provided is in jcx4917. This is our this is the standard analysis that the staff has prepared for the committee. We actually have available on our website a detailed explanation of what goes behind it. What we tried to do here is we look at what changes affect individuals, what changes affect business, but we look at the economic principle that ultimately, businesses dont pay taxes. Those taxes are born somewhere else. So theres an assumption based in it, which we think is consistent with the substantial amount of empirical economic literature. Beyond that, i think the table somewhat speaks for itself in terms of looking at changes in average tax rates that would result totaling the effect from business changes and individual changes. So thats what you see on an every other year basis from starting with 2019 through 2027. When you take a look at the passthrough changes, do you consider those in the individual bucket or to be in the corporate bucket or both . Well, the table itself, as i was just noting, combines everything. If youre referring to the supplemental table that we provided on the very last page of jcx49, where we broke this into an individual component and a business component, as i explained in the walkthrough, we take the analysis of the maximum rate on passthrough income as an individual tax rate, an individual tax rate issue. So the rate effect of the passthrough proposal is part of the individual analysis in that summary table. The business provisions, such as the denial of certain interest expenses, the expensing provisions, the changes for Small Business, some of those will affect both ccorporations. Some will affect scorporations which are passthroughs. We treat those all in the business component of the summary breakout, the breakout table. Isnt it true that hr1 eliminates the deduction for state and local income taxes . For individuals. Those taxes that individuals could otherwise claim under schedule a, under present law, would be repealed. Doesnt it also eliminate the deduction for state and local general sales taxes . Yes, under present law, theres election for a taxpayer to choose either the sales tax or individual income tax. Hr1 eliminate state and local property taxes in excess of 10,000. Thats correct, sir. Okay, cbo has found that Discretionary Spending which includes spending for transportation purposes has fallen as a percentage of Gross Domestic Product. And that between 1967 and 2016, it declined from 12. 7 to 6. 4 of gdp. How will rising interest costs on the public debt and ballooning deficits affect the ability of the federal government to support transportation and other Infrastructure Investments . Well, mr. Neal, youre asking for a sort of broad congressional budget fiscal planning question does it squeeze it . Its out of my expertise. Does it squeeze it . An additional expense in any area means that congress will have to make decisions on how to allocate revenues or expenditures. Thank you, mr. Chairman. Thank you, mr. Neal. Mr. Levin, youre recognized. Look at the distribution table, will you . We appreciate your putting it together, though it wasnt discussed in your presentation. If you look on page 6, it would appear that beginning in 2023, people making 20,000 through 40,000 would be paying more income tax. Is that correct . Yes, sir. Thats what the column shows. Do you know how Many Americans in those categories are included . Yes, i do have our projections of that. In 2023, we project there will be approximately 22 million tax filing units in our income category of 20,000 to 30,000. Approximately 18 million tax filing units between 30,000 and 40,000. Just under 14 million tax filing units, 40,000 to 50,000. Okay, so just looking at 20,000 through 40,000, how many is it altogether . Just those two figures . Lets see. So 22 plus 16. 38 million. 38 million. Beginning in 2023, would be paying higher taxes. On average, sir. On average. And is it possible that those between 50,000 and 100,000 would be paying more taxes depending on their deductions . Are you looking at the table . Yes. Between 50,000 and 100,000. Again, on average, 2023, our Analysis Shows tax reductions on average between 40,000 and 200,000. Individually, the change in taxes to those people, its possible they would be paying more taxes depending on their deductions, right . As averages, because of the substantial changes in the underlying legislation, there may be substantial differences across different taxpayers. The answer is really yes to that . Depending on their deduction. I just want to say, i raise this because the House Speaker said the focus is on middleclass tax relief. I quote, the focus is on directing that tax relief to the people in the middle, and the people who are trying to get there, and that is why we put our emphasis on that tax relief for those people who are in the middle, end of quote. I think this distribution table shows that the speakers statements deserve four pinocchios because these tables show very much that that isnt true. Look at table five. And look at 2027, if you would. I think it shows that those making a Million Dollars and more, for them, there would be a cut of 36. 617 billion, is that correct . Yes, sir, the entry on the far lefthand column bottom. Do you know how many taxpayers are making over 1 million on average, how much they would receive . I have not computed. Our projection for a number of tax filing units over 1 million in 2027 is 629,000 tax filing units. Which everybody could just do the math on that. If you compare 36 million to those between 20,000 and 50,000, that 36 totally overshadows. So i hope others will ask about passthroughs because as we discussed earlier, passthroughs go mainly to wealthy people. Thank you. Over 40 of people making over a Million Dollars. Your time has expired. According to analysis of the tax cuts and jobs act, you know, if youre a married couple with two kids earning 59,000, thats median throughout america. Today, you owe almost 1,600 in income taxes. Under the tax cuts and jobs act, youll only owe about 400. Thats a 75 cut in your taxes. As i look at your distribution, it appears that earnings in the 50,000 to 75,000 range, which Many Americans feel is middle income in many states, theyll see nearly an 8 reduction in their taxes. But those on the upper end, theyre making half a Million Dollars to a million, theyll see tax relief as well, but it is about half of that. My distribution analyzing your joint tax table, it looks like out of the tax cuts for families and businesses just next year, just next year, 60 , nearly 60 will go directly to those earning below 200,000, which in some of our hightax states, that feels like middle income because theyre taxed so horribly at the local level, and their cost is so high. Are those the ranges that youre looking at . Mr. Chairman, yes, as reported in the table. Let me just make one note reminding the members somewhat that the income categories that we use are not cash takehome pay. Its more expansive to reflect that some individuals may receive substantial retirement benefits, for benefits for example through their employers and so we measure income on an expanded basis for those that dont have Employer Benefits we dont say that their take home pay puts them in the same category as someone who may also have retirement benefits. Thats on the broader view. On the tax cuts from your distribution table you are looking at tax relief for families or Small Businesses then ultimately on the corporation side, as well. Thats correct. I was noting that in terms of interpreting the income category not to think of it as cash take home pay. One of the key questions here seems like for many people to get a deduction that helps them they have to itemize. For a lot of americans theyre left behind. In texas, michigan, a hardworking blue collar district is just Middle America and amazing. Less than three out of ten of his taxpayers itemized. So they are left out of they received a tax cut almost 1,800 but they are left out of the current tax code. I look at my friend from texas. We have different districts but only 12 itemize. Very few receive a chance for mortgage or real estate or help with charitable deductions. They are left out in the current tax code. Even though the district they receive a tax code of 1,200 under current law they are very much on their own. What is the effect of now having a zero percent tax rate by doubling the standard deduction . Depending on who you are the new family tax credit, is that standard deduction now for a family of nearly 24,000 zero tax rate . Does that impact families that dont itemize today . Mr. Chairman, it certainly does increase the standard deduction will increase the number of people who dont itemize. For those that already claim the standard deduction it further exempts an additional income. You have the further tradeoffs of hr 1 repeals personal exemptions but does expand the personal credit that i noted. May i ask you a question . The examples that you gave i think the 59,000 income, is that your opinion or is this something that he has substaniated . Based off of analysis. Is he substantiating those examples . If the gentleman yields i think i have control of the time. The tables you gave us that mr. Levin referenced earlier are tables that factor in tax cuts on wages for individuals whether itemized or not. The effects of our Small Businesses who for the first time are not left behind in tax form, as well as the impacts from the tax cuts from corporations and how they flow down through the workers and families, is that correct . The calculations embedded behind the table work through what an individual would pay through form 1040 as well as changes i mentioned in business. It does not i have not calculated a large number of specific examples but the calculator itself works through taxpayers of all different sorts. Perfect. Thank you. Mr. Lewis, you are recognized. Thank you, mr. Chairman for being here. For 53 years the tax code banned religious nonprofit, charitable and related organization by engaging in political activity. This bill striked as standard. Last week you were kind enough to explain the cost to my office. Can you explain this 2. 1 billion price tag to the rest of the committee . Certainly, mr. Lewis. What you are referring to for the rest of the members is the modification to what some people call the Johnson Amendment which is prohibition on political activity by religious organizations. We have estimated a revenue loss from the relaxation thats contained in hr 1 under the as introduced. Thats really based on whats been happening over the last 15, 20 years and what people under present law can deduct and what they cant deduct as a charitable donation. Over the last 15, 20 years as i think we are all aware there has been substantial growth in contributions to political organizations. As a general rule those contributions are not deductible. The proposal would say that certain political activity may perhaps now occur in religious organizations and we think that that would give some incentive, in fact it is very small, for some contributions that might currently go to what would be nondeductible, political organizations that there might be in shifting or an increase in a little bit of diversion in those contributions to certain religious organizations. If you get to make a contribution to a religious organization it is deductible and that is what leads to the revenue loss. Its a diversion of some of the substantial growth in political contributions into a deductible form. Its not deductible today. The new market tax credit, whole cities like new orleans, macon, georgia, savannah, suburban atlanta and neighborhood like inman park rely on Historic Preservation tax credit. This bill ends the program. What is going to happen to these Historic Places . Mr. Lewis, as you noted, the legislation would prospectively repeal new allocations of the new market tax are you saying there would not be any new tax credit for these Historic Places all across america . There is no replication of the current law benefits. Its not modified. Those provisions would be repealed. Finally, what about real people . There seems to be many parts in this bill that are just plain mean. They punish teachers, disable seniors, students, immigrants and the list goes on and on. Does this bill do anything to help those penalized in the tax code who cannot claim deduction for donating the work . And other people working in volunteer programs . As i noted, there are many current law deductions and credits that are repealed. You noted several of them in your question just now. Gentleman yields back, you are recognized. Put me back on the list. Thank you, mr. Chairman for being here. This bill paid for . Mr. Thompson, the revenue estimate as you can see is approximately a revenue loss of tenyear budget period i cant hear. The revenue table we provided projects over the ten year budget period a revenue loss of approximately 1. 5 trillion. Does that include interest . It does not include any changes in interest costs. I understand that at a minimum it is going to cost about 2. 3 trillion if interest calculations are added. And i just want to point out as we talk about fiscal responsibility on this committee and in the house, thats under the current low Interest Rates. A lot of folks say its okay to borrow now to do programs, in this case to give money to the we wealthiest people. I want to point out that Interest Rates are always low until they are not. And then you have a huge problem because then you have to start dealing with other programs that are important to all of our constituents. Health care, defense, education, infrastructure. The more money we spend servicing the debt the less we can spend on the every day quality of life issues and job issues for americans. The other question i have is on the section 1304, the uninsured loss issue, itemized deduction for casualty losses. Has that been expungeed from the law . Hr 1 would repeal the itemized deduction for casualty losses with grandfathered relief for hurricanes harvey, irma and mar maria. Mr. Chairman, why would you have done that . Why would you take away the ability for working class people who lose their homes in disasters from being able to get a little help from the tax code . And to add injury to insult or insult to injury, you grandfather in the hurricane folks so the folks in texas who lost their homes in a hurricane, you take care of them, but anybody else who gets a disaster the 9,000 people in california in my district most of which were my district who lost their homes to the worst fires we have ever seen, you take away their ability to benefit from the tax code . Why would you have done that . I would be glad to go through this debate. We are discussing it right now. We are questioning about the amendment and nature of the substitute. We will continue with that. As we take up each provision of this bill and there are many of them, i know you are passionate about that. I am reclaiming my time. I am passionate. I have 9,000 people who have their homes burned to the ground. Their lives are changed. The communities in which they live are changed. And youre pulling the rug right from underneath them. I think it is a more than fair question to ask why we would consider changing the tax code to take advantage of those people who working class people in these neighborhoods who lost everything they own. And we are going to change the tax code. While we grandfather in folks from previous disasters, why in the world would we do that . I would yield to you if you can explain why we would do that . Having a number of families who have also lost their homes you took care of them. You grandfathered them in. Are you yielding time to answer . I yield to you. We all reacted together in a bipartisan way to provide Property Casualty loss for hurricanes irma, harvey and maria. I expect another tax relief package to be coming forward im told within the month where in addition to the relief for Disaster Relief for wildfires we will also, my intention is to be taking up tax relief for those families, as well. I think it is critically important. I am reclaiming my time. I dont know why in the world we would sponsor out this piece of legislation this is a wrong message to send to people who have just had their entire life turned upside down. It is absolutely wrong headed. Its cruel. Its heartless and it is the wrong thing to tell americans, hard working middle class americans who have lost everything. I am going to work to ensure that they can write that off. I invite you to join me. Mr. Nunez you are recognized. Thank you, mr. Chairman. Looking at the charts in 2019 when all of the policies are in full effect, isnt it true that all income groups will get a tax cut . Our Analysis Shows tax reductions across all the income categories in calendar year 2019. Thank you. Also, your tables show that individuals benefit from Corporate Tax reductions. Is that correct . As i noted a little bit earlier divide into individual and in business. Its business not just corporations. So Corporate Tax cuts can help with the middle class . Thats part of the incident analysis to which i referred later i mean earlier. Thank you. Also, the tables do not effect potentially the growth rate. So the tables can actually under estimate the actual anticipated growth rate because you are not using dynamic scoring for that . The analysis that my colleagues and i have presented here today is using our conventional modeling which does account for a lot of behavioral changes. As you note it does not account for potential effects from increased or any change in economic growth. Under house rule 13a after the Committee Reports bill were required to undertake that analysis subsequent to amendments that the committee might make. And then we will have that analysis after the bill is out . We will do our best to do that, sir, yes. I appreciate that. Mr. Chairman, i will yield back. You are recognized. Will you yield and i yield to you if i am eventually recognized. I thank you very much. Amidst the joyous celebration here thursday when this bill was rolled out speaker ryan declared that a typical family of four was winning the prize of getting a full gas tank for a year. I just want to ask you before our Service Sessions are full of people lined up to get this free gasoline claim with their tax change if you and joint tax did the analysis that led to those claims about the typical family of four and what they would get. I have not seen it in writing anywhere. My understanding is you did distribution tables but none of this analysis was done by someone else. You know that its our policy to treat as confidential any work we do for any member. There is no analysis. There is no analysis you have done here and you dont know whether any credible methodology was used in making up these claims or not. Let me ask you also about something i know you do know because your name is on it and that is in october of 2013 the joint Tax Committee put out modeling the distribution of taxes on business income. Is it not correct that in that report you determined that the effect of Corporate Taxes and changing them 75 of the tax is borne by shareholders, by capital and only 25 by workers. That is actually the long run result. And about the same time the Treasury Department said you were a little conservative. They said it was 82 to the owners of capital and only 18 to workers. Can you confirm the conclusion Steve Rosenthal at the Tax Policy Center that since foreigners own 35 of u. S. Corporate stock they will get about 70 billion from this bill. Because they are forn foreignery wont have to pay a nickel of taxes on that. I cannot confirm. It is the result and it is not part of our distribution analysis benefits that foreign persons may get. Thats foreigners wouldnt pay taxes on their share of this boondoggle, would they . I didnt hear you. Foreigners wouldnt have to pay taxes on any increased dividends that they would have. As a blanket statement thats not completely correct because a number of Foreign Investors have effectively connected income in the United States. If they are not in that situation. They are subject to the Corporate Income tax and subject to the normal foreign investor would not be in that situation. I want to ask you also about another joint Taxation Committee report. And that was the one in 2011 also under your direction that concluded as many other people did that if you eliminate every Corporate Tax advantage, loop hole, or incentive that someone else might call it you can only reduce the Corporate Tax rate to 28 well short of the 20 that is being advocated today. That has not been changed by joint tax since then, has it . We have not reproduced the 2011 study. I do recall the 2011 study. Thank you. Let me ask you also the New York Times estimated that President Trump will personally gain over 1 billion from what is being presented here today as a middle class tax bill. You will be able to do a little more than get a free tank of gas for the year. If you had the last decade of his tax returns for him, his family, his 500 placentities, would your staff have capacity to do an evaluation of those and working papers to determine how accurate the New York Times is and present us a line by line analysis regarding how much the president will be enriched by repealing the alternative minimum tax, expanding the loop hole for pass through and maintaining the interest loop hole he promised to abolish. Is that something you have the capability to do under the provisions of the tax code and with the experts you have in your office . I will make two or three points. My colleagues are extremely capable. They are not auditors. That is a different developed skill, but to undertake the ten Year Analysis that you are talking about i would require a lot more Financial Resources to hire additional people. Would require a little time like the first time i made an amendment to do just that. Gentlemans time is expired. Before i go further i want to note something. Used the term free tank of gas that is supposedly going to come out of this legislation. These are taxpayer dollars that they get to keep in their pocket in order to pay for that tax. They worked hard to earn. Isnt that correct . Thats not money that we are somehow giving to the taxpayers. Its money we would rather take from the taxpayers unless we reform the code and those individuals get to use their dollars for whatever they choose to be used for such as tanks of gas for the year. Isnt that correct . I believe the reference quoted was the tax savings could be spent towards something such as gasoline. Means we are not taking those dollars from those hard working americans that earn that dollar. So this is their money that they get to use for that free tank of gas or for whatever they choose to do. Yes it would be. You are familiar with the tax code. I have known you for years and i know you are very familiar with it. I want to clarify some of the record here. What i have on my right is a pile of the regulations and tax code as it exists today. Do you happen to know how many pages that is . No. I dont. Its depending on the different publisher and whether you count foot notes you can get different results. Your stack is impressive. Thank you. I appreciate it. I do like my stack because it shows in my opinion the complicated nature of the code of 70,000 plus pages. Hr 1 i represent here today, how many pages is this . I believe it is 429 pages. I didnt have a copy with me. So to the request to delay the proceedings for one more week that would mean every american, 300 Million People that live in america would be subject to the 70,000 pages of existing tax code and all of its complications and special interests and loopholes for at least another week because these guys dont want to get to 429 pages of legislative tax for us to debate this week. Is that fair to say . Im sorry, i missed the i dont need you to answer that. I will yield back. Will the gentleman yield . He is not going down that road. Mr. Larsson. Would you yield . Excuse me. What were the rules again . Treasury one, two and three. Listen, we dont want to lose any of these since this is theater and that is all this is today is theater, this is as we started out the conversation the oldest continuous committee in the United States congress. And without a hearing youre going to proceed with the great charade. I would like to call the head of the department of Revenue Services from the state of connecticut. Have you heard from him . I have not received a phone call. Has he been called as an Expert Witness . No. He hasnt been called as an Expert Witness. And the transfer that will take place, i will take lees comments about the transfer of wealth from one region of the country to the other. On the backs of hard working people of the middle class, you talk about taxing success. All of our working professionals whether a machinist or a teacher and in the case of a teacher if they reach into their pocket, if they reach into their pocket to pay for their students you get rid of that deduction, as well. So you can give it to somebody who has already got an 11 million deduction on the estate tax. This is outrageous. Youre all good and honorable people. It is hard to believe that we find ourselves in this situation. You just went through this with the health care act. The American Public just witnessed again what happens when you jam something down. For the American Public understand what is going on here today is 2416. That is the only thing you need to know for this discussion and debate today. I apologize to you and your hard working staff because youre merely a show piece today for your camouflage for what is really going on here. It has been stated over and over again that they need a political win. You know who needs a win . The American People need a win. They need to see us acting in regular order responsibly. Mr. Neil pointed out in his opening remarks in the Tax Reform Act of 86, 30 hearings were conducted in this committee. 12 in the subcommittee, 450 expert testimonies. We have none, none. No one was allowed to come forward. As was pointed out, no one from the administration will even sit in front of us. We are the oldest committee in congress. Many would argue the most prestigious and members on this side of the aisle arent even entitled to bring an Expert Witness on any aspect of the tax code that effects 100 of our economy, 100 of the economy is impacted. And people in my state in the middle class are going to get a tax increase, a tax increase thanks to the mir ideologicerei you have decided behind closed doors because they make itemized deductions will no longer have. They will no longer have state and local tax deduction. 4,000 eliminated from the personal exemption. Medical expenses no longer. Elimbinates deductions for Student Loans and Teacher Education for the classroom and employer provided Education Assistance because they made a decision behind closed doors nout with any experts or testimony, but they have made the decision that this is the way it is going to be and the vote will proceed like that in the committee. Check me if im wrong on this. It will be 2416 right down the line. All the way until they can get this to the floor of the house. And then on the floor of the house they will continue to perpetuate this great myth that somehow we went through any kind of regular order or there was any bipartisanship that was alluded to. This is not an honorable time or day for this committee or for democracy in america. Not a single hearing or a single Expert Witness. Time is expired. Thank you. It took an hour and 15 minutes for the wattage to go up. Here we go. I dont find it necessarily more persuasive when people speak louder but lets get right to some of the things. We have heard criticisms from a majority that in this very room move through the Affordable Care act and then Speaker Pelosi said this is the bill we have to pass so that you know what is in it. The retroactive nostalgia of our process i think we can dismiss. Mr. Neil made an interesting point and that was this. Some of this he characterized as being built on maybes. Lets even stipulate that some of this lets assume mr. Neil is right for the sake of argument. Here is my question. Lets set aside the maybes and look at the certainties. What are the certainties that people in the middle class can count on with the passage of hr 1 . Did the gentleman yield . No i wont. Can you bring to our attention the tax rates, tax credits and so forth that are certainly in the tax that you can characterize as benefitting the middle income . To review maybe the substantial changes that i noted in the walk through, hr 1 would change the rate structure and the standard deduction structure by doubling. Just to pause and emfuicize that happens with certainty in the tax . Certain if the law is passed. Please continue. Rates would change. I mentioned, bracket break points at the upper levels are generally increased compared to comparable rate bracket entry points. Just to emphasize that is certainly in the text . Yes it is. The alternative minimum tax would be repealed and the as i noted the child credit would be retained and expanded. This is partially offset by the loss of personal exemptions but the child credit is expanded. The separate personal credit, the Family Credit for the taxpayer and taxpayers spouse would be implemented. That is all certain relief in hr 1. I want to shift quickly to one of the observations that the gentleman from texas was making. Even assume for the sake of argument in terms of ratio of tax or business tax relief, what he was arguing is there is a disproportionate impact favorably towards capital as opposed to labor. That was his argument. Even if that is true isnt there a benefit for labor . Even the folks that are the most critics of business tax have to acknowledge by implication of that argument that there is a benefit for labor. Can you highlight that . The point behind our analysis and i was perhaps too brief before, is that there is fairly substantial both economic theory and empirical findings that taxes imposed on capital income or on business income can have an effect on labor income over the long haul. And the 75 25 split cited was our long term analysis of the split of a dollar of tax on corporate business income. Were projecting based on empirical work would be 75ents can borne by the owners of that business and 25 would be to labor in terms of either increased employment activity or higher wages. And then in closing i think i represent a constituency that says im not particularly concerned about the equation by which i get tax relief. This is what my constituents are telling me. They want to know that they get tax relief. Can you speak to that . Are folks all across the spectrum in other words highlighting mr. None ezs questions. Folks are getting tax relief under hr 1 beginning in 2019. In 2019 our projections, the analysis that i just described would say that there is a tax benefit to all income categories as we measure them. I yield back. Gentlemans time is expired. You are recognized. Thank you. I would like to pick up where my friend from illinois left off to figure out what people can actually count on. You talk about people in the income categories on average in 2019. Now, isnt it true that the major benefit that they get, the tax credit, expires in five years . There are several well, three or four things that expire in five years. The 300 taxpayer credit and the credit for the spouse expire after five years. About the same time that the estate tax goes away one of the major benefits disappears. Isnt it true that as we move to chained cpi that that is going to lift people up more rapidly through the income tax brackets, paying more over the course of the next ten years . Is that why it is there . Socalled chain cpi will measure inflation with the present inflation yaumt. Compared to current tax law people are going to be pulled up through tax brackets more rapidly in the future. Thats something people can count on. My friends want to significantly reduce the benefits for income tax and property tax deductions. Is that also true for people who would take advantage of pass through business income . Can they continue to fully deduct their expenses for income tax and for Interest Deductions . Let me start with Interest Deductions. First the proposal in the legislation applies the denial of net interest expense in excess of 30 of adjusted taxable income to all business entities regardless of whether they are in pass through form or a c corporation. With respect to income taxes and property taxes, income taxes and property taxes that are attributable to the production of income may still be deducted as expenses in arriving at that income. Income taxes that would otherwise be deducted on present law schedule a the intent of the legislation is that that itemized deduction would be denied. So how much of it is going to be fully deductible . In the case of an individual such as myself there would be no itemized deduction for if you are like the basketball coach in kansas who decided that he is going to be a pass through entity he would be providing professional services and denied the benefit of the maximum rate of tax on pass through income of 25 and all of his income taxes would not be deductible. And would his the cost that he has for paying for professional help to look for new loopholes, would that be fully deductible . Taxpayers are going to be limited. Tax advice is also not deductible, sir, under hr 1. For individuals who recharacterize as small pass through . Well, first of all, the individual who is recharacterized isnt recharacterized so as a general matter tax advice received by individuals is not deductible. If it is part of the if you have a Business Enterprise and you engage an attorney and accountant to help you can accounting and legal questions those would be deductible business expenses. My friend from new york has all of these things stacked up and waves a bill. Most of those are regulations implementing a bill. If you pass this bill there will be all sorts of regulations you will have to promulgate in addition. Part of it is trying to put guard rails on pass through income is going to take all sorts of rules and regulations and people will be able to deduct their negotiation with their attorneys and accountants. Gentlemans time has expired. Thank you very much. Mr. Kelly you are recognized. Thank you, chairman. Thank you for being here. Staff, thank you for being here. You guys do inkebl wo incredie work. One colleague said this does not result the tax cut doesnt help people in connecticuts first district. It actually comes down to tax cuts for four person household of 4,096. According to my calculations that would take care of ten months of car or truck payments, take care of five months of a rent payment. In my district we get 1,971. Different amount of savings. The same type of results where we are saving hard working american taxpayers money. They get to keep more of their own money. Isnt that what the whole bill is about . Thats not really a question im supposed to answer. Thats for members to decide. If you were a taxpayer would you feel better about this or worse about this . I know you are a taxpayer. Share your feelings. Not if you lived in connecticut. Its for the elected members of congress to make the decisions. The next time you go to buy a car or truck i have a person that can help you navigate that. And well use your tax savings to make it easier on the pocket book. The other thing i think that is interesting is we are talking today and there is a great concern with the deficits, the rising deficits. Im trying to understand unless you are rip van wrinkle he slept for 20 years some members on the other side have only been asleep for ten years because debt went from 8 trillion in 2008 and now it is over 20 trillion. My question would be, were these deficits hid from people where they didnt see the escalation of the deficit . These are pretty much available to anybody, are they not . Im not clear on what your deficit here is the question. Who was privy to understanding what the debt level of the United States federal government was . Is this secretly held or privately held . It certainly is not private information. There are many reports that report on the level of debt and Interest Payments on the debt. So it is available to anybody. What im really concerned about i was not here in 2008. I was in the private sector trying to get through very difficult times. Having one of my franchises taken away through the wisdom of the federal government. Fun time for a hard working american taxpayer. You are not going to have your business anymore because geniuses in washington decided you dont deserve to keep that. Im not here because i needed a career y. Left a career i was happy with to come here because i was tired of seeing every day americans get bull dozed by a federal government that makes decisions that effects their life. We are trying to break the status quo. The worst thing that can come out of this committee is that we stick with the status quo and remain stuck in the world view of where you start a business we remain stuck in that we have deficits rising and i am impressed by the fact that we can turn a blind eye to debt and look at today and what i term as the biggest turn around opportunity in the American Business community that we have ever seen. Thats where the jobs come from. Thats where the jobs come from. When you talk about corporate people and Foreign Investors, why do we have such a blind eye to the fact if you want to fix Social Security you better have more people participating in labor workforce. Thats who funds it. Since november 9 of last year we have seen an incredible amount of optimism in our economy. That was a result of an election. My question to you, as you sit here today and you are going to hear this all the way through this because this is hell week, you are going to hear about what we are not doing for certain people. I would just submit to my friends that this effort is a three decade effort to change the tide of americas trajectory. We cannot continue at the status quo and leave our position in the world and not be able to see our citizens rise to a new level and sit back and say we just couldnt get through that because we disagreed on the messaging of it. I want to thank you for wahat yu are doing. You guys are incredible. My question is why do you do this . We appreciate everything you are doing. I would just tell you, you cant look at what mr. Reed has and say somehow if we keep it the same wont that be wonderful . You are recognized. Thank you, mr. Chairman. Thank you for being here and for your service and for your patience. I sure am glad picking up from my good friend from pennsylvanias line, at least he had the courage to raise the issue about debt and deficits under this plan. I wish there was more scrutiny of that. Its clear that the budget resolution that my republican friends passed recently makes room for an additional 1. 5 trillion worth of debt in order to pass this tax bill. Is that correct . The budget resolution provides for 1. 5 trillion. Just for the record getting back to my Friends Point back in 2008 when president obama inherited this god awful economic recession he also inherited a 1. 5 trillion budget deficit from the previous administration. When he left office earlier this year he cut that down by over two thirds so we started heading in the right direction. This plan will reverse that. According to the congressional Budgets Office recent estimates that public held debt as a percentage of our gdp currently is roughly 77 . It is projected to go up to 91 under current revenue estimates without this plan. Im not asking you to verify the numbers because you dont calculate that. Clearly with an additional 1. 5 trillion worth of debt that also does not include the increased interest burden we will have to pay on an expansion of that publicly held debt. Back to my Friends Point. There are certain ways of masking the true size of that deficit. One of which and it has been used in the past is expiring or phased out provisions. Now, you have indicated one. Are there certain provisions under the republican tax plan that phases out or expires over the next ten years . Yes, as i noted in the walk through the expansion of bonus depreciation to 100 expensing of those assets is only for a fiveyear period. It expires after five years. The expansion of the allowable expensing under section 179 to 5 million worth of annual Capital Expenditures also expires after five years. And the Family Flexibility tax credit, as well, will phase out . I noted that the family portion for the taxpayer and taxpayers spouse expires after five years. The child credit is permanent. And one reason for doing that you dont have to answer this is clearly to mask the size of the short fall in revenue under this tax plan by expiring that. You have been around here long enough to realize as many of us do here in committee that when these popular tax provisions suddenly expire or are on the verge of phasing out Congress Typically doesnt have the stomach to let that happen and figures out a way of extending that. If that is true then that 1. 5 trillion is really a low ball when it comes to public debt added on to this plan if congress does not let the provisions expire. Is that not true . That has been the history of this place for quite sometime. As i said a couple of times decision for members of congress to make. In fact, we just turned ourselves into pretzels trying to get rid of socalled tax extenders. Yearly exercise Congress Makes to extend certain tax provisions on the verge of expiring and then had to have an extender package. Now we are creating a whole new scenario of another tax extender package year after year after year in order to retain these benefits. Let me shift again. The dog that is not barking needs to be listened to, as well. Thats the change in the indexing for inflation. Right now one of the things this plan calls for is doubling of the standard deduction. Is that correct . Yes, sir. Under current law the standard deduction is indexed for inflation. Is that right . Yes, it is. Under this plan it would be changed to chain cpi index, is that right . Standard deduction, rate brackets would be indexed but as you observed it would be according to your calculations the chained index would actually not be as generous as current inflationary index. Those are the projections and that is what is reflected in the revenue analysis that we presented on the effect of the modification to the inflation. Are there other provisions . Is the entire code going to chained cpi index . Yes, sir. That would result in the less generous tax return or tax benefit for the taxpayer i assume. Well, that is reflected in our calculation. Its online 184. I yield back. Thank you. Thank you, mr. Chairman. I want to thank you and the staff for moving this piece of legislation forward with all of us. Look, it is kind of interesting, as i listen to both sides and i appreciate what mr. Kind said about what president obama got. Look what President Trump has today. If we do nothing President Trump if he is there for eight years will experience an 8 trillion to 10 trillion debt increase, too. At some point in time hard working taxpayers are looking to us to get something done. They are sick and tired of the politics and probably sick and tired of watching this hearing because we are going back and forth. At some point in time we have to do what is right for them. I am probably one of the few on this panel that have actually had to sit down when a hard working taxpayer walks in with three kids, two kids into your office with boxes of Tax Information and they sit down and go through the tax report and then at the end they say i have all of that interest and all of that medical deductions but you are telling me i dont meet the standard deduction. And i would say yes, you dont meet the standard deduction so it is not deductible. 75 of americans do not itemize. So when we Start Talking about some of these deductions we have to start thinking about that. Is that a number that you can agree with . I know there are enough studies. Present law projections are that approximately 29 of tax filing units will elect to itemize over the next couple of years. 29 . If we double the standard deduction from 12,000 to 24,000 do you have a calculation of how many people itemize . We estimated that for next year under hr 1 the chairmans amendment approximately six percent of tax filing units would elect to itemize. We are talking about six percent of the people. When the other side continues to talk about interest and state and local taxes and medical and all of those issues which are itemized deductions we are talking about six percent of the people. Most of those are probably wealthiest of individuals . Itemizers under present law are heavily represented in the top third of the income distribution. I hope the other side continues to represent. We are trying to make sure the middle income gets tax breaks here. You also talked about the Corporate Income tax rate. I said this many times. Corporations dont pay income tax. Is that correct . Corporations remit tax payments to the treasury as i was discussing. I think the Economic Analysis is that ultimately taxes are borne by real persons. Borne by the consumer. When the corporation gets a tax cut who wins . Would it be the consumer that wins . As i explained earlier our analysis is that the benefici y beneficiaries can be workers and owners of the corporations so they would both be consumers. When you buy a product that a Corporation Makes it will be less costly. As far as credits i also did work in the tax world for almost three decades. People would say i have this credit or that credit. Would you agree that if you cut their taxes in many cases they may not need the credits they are getting today because their tax cuts would equal in some cases the credits that they already have . Is that a true statement . That can be the trade off for many people. And the case reduction in tax rates or increase in standard deduction could be better than providing most times thats what it is going to be. Some of the credits i know my colleagues are talking about if you reduce Corporate Tax rate and doing some of the work with historical projects they will have more dollars in their pockets because they will have a less tax rate. Is that correct . Reduced tax rate would increase the after tax return to any potential investment project. So it is true that if we cut the taxes on hard working taxpayers they will have more money to decide what they want to do instead of giving it to the federal government . They would have more money to make choicewise. This is pretty simple. We can argue all day about this deduction and that deduction. I have one member on the other side who probably doesnt realize that almost 90 , one member from texas almost 90 of the people do not itemize in his district. These are the numbers they should be looking at as we have looked at. So in the end again i thank you for what you are doing. I do believe this is a plan that will give hard working taxpayers more money and stop the burden of giving the federal government more money which people back home are tired of giving the federal government money. Time has expired. You are recognized. Welcome to the meeting today. This is going to be an interesting day. It will be a preface to a few other days. I havent heard one democrat before this meeting or today say that they want the status quo. So what in gods name are you talking about . You are making this stuff up. The whole bill is made up. By the way, the new Jersey Chamber of commerce today, you guys got real problems. They come out against this legislation. They are very specific as to why. They even said this legislation is approved people with businesses with have another reason to leave new jersey. I wonder what they mean by that. Ladies and gentlemen, i would the gentleman yield . No. Thats the first time i never yielded since i have been here. No. The irs announced an annual inflation adjustment for the 2018 last month. You know what it is. Thank you for your patience with us. You have done a great job. 13,000 for a married couple. They announced that. They said can you tell me what 13,000 times two is. 26. Very good. Very good. Everyone is telling me that this misguided bill doubles the standard deduction. You just heard it from my brother from ohio. Can you tell me what the standard deduction will be for a married couple under this irresponsible hr 1 . For next year 24,000. Its 24,000, is it more or less than 26,000 . It is less. 1,600 is a lot of money for most people. I represent firefighters. I represent police officers. I represent teachers, seam strszstrsz strsz they didnt write those books that you got in front of you. They are corporate lawyers. They wrote them. We are here to represent all the people. Corporate lawyers, teachers, doctors. So can we all agree that we were misled . The American People by falsely claiming this bill doubles the standard deduction over these not these four days. Can i also ask about a personal exemption . The bill eliminates personal exemptions, correct . Correct. Thank you. For a married couple with two children lets get down to the weeds. The current standard deduction of 13,000 and four personal exemptions totaling 16,6 16,600s up to 29,6 29,600 in reductions taxable income. Is the new standard deduction of 24,000 more or less than 29,600 . Im asking arbitrarily. Come on. This is a joke. And you got to face up to it. Brothers and sisters on the other side, this is not the bill you want. I want to change the status quo just as much as you want to change the status quo. Isnt it true that this family would see an increase that i just mentioned in taxable income of 5,600 adding to the tax burden rather than massaging it . Let me use that word for now. Would the new temporary Child Tax Credit make up for this tax increase . It would not. It would not. Are you listening . It would not. I dont care whether you live in dakota, jersey, this thing is really shafting everybody. Its an equal opportunity shafter, this bill. I got to admit that. There are a lot of people expecting a tax cut who will be big losers under this bill. You are an expert in taxes and im not apparently, but through the chair, he just sent me his tax thing what he is paying this year and next year. This guy makes pretty good income. He says i listened to all of this and the campaign stuff and this stuff and to you guys, those guys. Im going to have to pay almost 5,000 more under this new bill. Let me tell you something, we got major problems here. And we all can come together and work out the differences or gentlemans time has expired. Or we can all play or we can all play games. Thank you for your courtesy. Youre recognized. Mr. Chairman, thank you very much. This is an exciting opportunity we all have before us to do Something Wonderful to the American People. Im looking here at some of the data in front of us for every district represented on this committee, the average family of four and as a member of a family of four, im very grateful to this, but more importantly for all the people back home, there is significant tax relief. In some districts like in minnesota, new york, washington, its over 5,000 for the average family of four. So this is a wonderful opportunity and a big day for this committee and hopefully, hopefully its a big day of Something Special for all American Families. But mr. Barthold, what i want to focus on is a lot of the frustration thats out there in our country. I think a lot of americans for some years now have been reading about an economic recovery. Yet theyre still struggling to get by. Theyd like to get ahead and they read about how others have recovered and how the stock markets doing so well, yet their incomes are stagnant. And maybe their children have gone to college, gotten a degree, gotten into debt and cant find a quality job. And one of the big frustrations out there is that the tax code isnt fair. That there are a lot of people in this country who exploit the tax code for their benefit, that their American Companies who get around our existing rules or exploit our existing rules make big profits and perhaps maybe dont pay their fair share. My colleagues referenced the bush tax cuts. How is this bill different than those in addressing some of this exploitation of rules like shifting of jobs and income overseas, operations overseas that a lot of taxpayers have stood back and watched as they struggle and yet others, special interests perhaps with high powered lobbyists, have created these rules or these scenarios where some arent paying their fair share. How is this different than the 01 and ye03 tax ruts . The 2001 and 2003 tax legislation primarily focused on individuals in terms of individual tax rates and treatment of income at the individual level. The legislation you have before you in hr 1 makes much more substantial revisions in terms of the business tax base and the tax rates applicable to business income. So youd be changing incentives that businesses have had for the past two decades by changing investment incentives, in terms of cost recovery, changing investment incentives in terms of axe tax rate of return by looking at lower tax rates. You have fundamental change in shifting from a system of basically worldwide taxation for multi u. S. Based Multinational Enterprises to a territorial regime. It has certain base erosion protections. Change the economic ground. Without all of these changes that you outline, is it likely that American Companies continue shifting jobs and opportunities overseas . The projections and its reflected in baseline projection on receipts is that theres not been strong corporate receipt growth in the United States in part because of benefits that might be received by investment overseas. Now, as a caveat, its important to recognize theres a lot of Growth Opportunities a brobroad there are a lot of good reasons to do things abroad. Is it more likely as a result of this legislation that American Companies will invest more here in this country, keep and create jobs here in this country . We think the lower corporate operate provides incentives to but for foreign based enterprises to make investments in the United States. Not only do we deliver tax relief for every american family, especially those who feel like theyve been left behind, but i think we also create more opportunities for every american family, especially younger workers who went to college based on a promise and the promise has been broken for a lot of them. Mr. Chairman, i want to thank you again for giving every member of this opportunity every member of this committee the opportunity to truly be part of something historic, to improve the quality of life and every american and every american family. Thank you. Dr. Davies, youre recognized. Thank you very much, mr. Chairman. Mr. Barthold, i just heard my colleague from florida mention individuals going to college. Being able to have regular lives. Could you tell me how much in direct cuts are made with respect to provisions to individuals to pay for college. Mr. Davis, youre asking for changes in the chairmans mark that relate to education provisions under present law. Id noted in the initial overview that there were some there was some expansions to the American Opportunity tax credit and section 529 plans, but i also noted that certain other provisions were repealed. Some of those provisions would be the deduction for student Loan Interest, special rule for education savings bonds. As part of the modifications the american opportunities credit, the Lifetime Learning Credit is repealed. The exclusion for employer provided Educational Assistance would also be repealed. It ends hr 1 would end contributions to coverdale savings accounted but provides they be rolled over into modifications of sections 529 plans. Also repeals an exclusion for employer provided tuition deductions. Ive heard the majority talk about getting rid of loopholes for the wealthy. Im just looking at the fact that 40 of the taxpayers that take above the line deduction for student Loan Interest make less than 50,000 a year. 50 that take the above the line deduction tuition and related expenses make less than 50,000 a year. So when we look at these, are any of these targeted for those wealthy individuals that experience loopholes . Weve not undertaken distributional analysis. So i dont have anything that would dispute anything that youve just presented, mr. Davis. So i really cant comment further on the extent to which some of these provisions are utilized by higher income individuals. As you noted, above the line deductions are available to any taxpayer regardless of income. Do you know how many taxpayers would be affected by the student loan Interest Deduction . I will have to report back to the Committee Later on that. Ill ask my colleagues to look at some of our projections on that. I think i can provide that information later. Adoption credits . The adoption credit, again, ill have to report subsequently on that as well. I spend a lot of time with young individuals over the weekend and every group that i came into contact with were concerned about how theyre going to pay off their Student Loan Debt and i think across the board this becomes a major concern and i hope that as we go through the bill and continue to rework it that some way or another well find a way to help make sure that these individuals who are going to college, who have gone to college, who have huge debt, will be able to get some assistance. Thank you, mr. Chairman and i yield back. Mr. Davis. Mr. Chairman, ill try to provide the information that mr. Davis requested to all the members of the committee by tomorrow morning. Thank you, dr. Davis. Mr. Paulson, youre recognized. Mr. Chairman, mr. Barthold, i just want to go back to the distribution effects you identified on chart or distribution table. If im looking at this correctly, every income category in this Distribution Category shows a reduction in federal income taxes paid. Is that correct . Mr. Paulson, yes, for 2019, yes, sir. So even in the category, say, 50,000 to 75,000, so about 8 reduction in taxes in that income category itself, correct. The table reports the percentage reduction by category, yes, sir. As i add this up, below 200,000, its about 80 of all tax relief going to that below 200,000 category. Middle income, lower income folks. Thats where this is going, correct . I didnt do a cumulative percentage calculation, but your tablation looks correct. Clearly this is helping real people. Its helping teachers. Its helping students. Its helping struggling families that are living paycheck to paycheck. But i think a lot of americans and certainly constituents in my district can appreciate that tax reform isnt just about giving someone that benefit of that extra dollar right now. It is about making our economy boom again. Its about being competitive, having a competitive growing economy so young people getting out of college will be able to pay their Student Loans and families will have a pay increase in their wages. And you mentioned earlier that some of the economic effects of tax reform might be shown when you score the bill, after it passes Committee Going to the floor, right . Youll show the economic benefits of a growing economy as a part of that dynamic scoring . As i noted the house rule requires us to undertake Economic Analysis, an estimate of we endeavor to comply about w thith radithat rule. The lowest rate for Small Businesses main street, mom and pop businesses that weve seen for Small Businesses in decades, larger businesses have a 20 corporate rate which you had mentioned so will actually be competitive. Not the lowest in the world but well be competitive in the world again. International which is really important in terms of making sure not only american jobs arent going overseas but keeping american research, american manufacturing, and american headquarters here, youll be able to take into account those effects as a part