Cspan3. Dr. Kirk newman on his book hearing children. The a surgeons story on the front lines of pediatric medicine. The conversations i hear are cutting things like medicaid and cutting the nih and doing all these things when were on the cusp of such terrific discoveries and when you think about half of the people that are on medicaid, half, of the beneficiaries are children, so whose going to get hurt. Why do we want to do that . Were not doing that to the elderly on medicare, why would we want to do that . We should double down and put more into our children. Watch the entire Program Saturday at 7 00 p. M. Eastern. Also on book tv on cspan2, david good hart on his book the road to some wrrks the pop lift revoelt and you see this in the contempt that people in my email chain after brexit. You had left wing professors why did we give these people the vote without some kind of iq test. For more go to book tv. Org. The Senate Finance Committee Held a hearing last week to consider President Trumps nomination of david cotter to be the assistant treasury secretary for tax policy. David cotter a former Senate Legislative aid would play a key role in the republicans tax reform effort. Now were going to shift a little bit and were going to consider the nomination of mr. David cotter to serve as assistant secretary to treasury for tax poll sixty mr. Cotter, welcome to the finance committee and we appreciate your willingness to appear before us today. We also appreciate your willingness to serve in this capacity and im sure that the significance of this position at this crucial time is not lost on you. Its not lost on any member of this committee. Tax reform has been a major focus of our committee for sometime now and were grateful to have you here to discuss your thoughts on these matters. On a number of occasions ive stated my view of the president ial leadership will be a key component to any successful tax reform effort. Just the last week i quoted president obama in a speech on a senate floor back in 2012 he said, things like, quote, our current Corporate Tax system is outdated, unfair and inefficient, end quote. The problem was that president obama never really got around to truly leading out on tax reform. I expect more from President Trump on tax reform. That expectation comes in large part because of knowing him and knowing knowing the way he approaches things. The i have to say also because he and secretary mnuchin have been talking about it so much, but more than that theyve engaged with congress and the public on these issues and mr. Kauttier i believe that your nomination is another way this president has furthered demonstrated his commitment on our job killing tax code. Your experience as a practitioner, tax expert will be a crucial part of this endeavor. Now before i finish up with my remarks, i also want to address another important issue, one that i want to stress with all nominees that come before the committee. Whether were talking about tax reform or the administration of existing tax policy, it is critically important that we keep open lines of communication between both parties in congress and the executive branch. My hope today is that youll commit to providing timely and responsive answers to inquiries committed by members especially if they sit on this committee. That is the expectation and quite frankly anything short of that is unacceptable. With that i want to thank you once again for able to being here today and ill turn to senator for remarks. Thank you very much mr. , chairman and colleagues since this is a tax policy doubleheader for the finance committee and were only at the half way mark im going to be brief this morning. Mr. Kauttier has been nominated to serve as the assistant treasury secretary for tax policy. It is a very tough job and it is especially challenging when the congress is gearing up to work on major tax legislation where i very much share senator mccaskills view on the importance of it being bipartisan. In my view the big challenge at the heart of tax reform is guaranteeing that everybody in america has a chance to get ahead not just the fortunate few. If tax reform becomes a partisan exercise for slashing rates for just the wealthy, the American People will see this as a con job thats because it will leave in lace the root causes of the appalling unfairness in the tax code. The fact is, the tax code in America Today is really a tale of two systems. There is one system for cops and nurses and it is compulsary and its strict and basically their taxes come out of every single paycheck and then theres another system for the lucky few that says, you can pay what you want and when you want to. And it goes without saying that the nominees for top jobs in tax policy need to have the knowledge and experience to fix this root unfairness and its also violental to make sure nominees havent contributed to the problems in the first place. Now i have real concerns mr. Kauttier have talked about this about every matters that took place during his time as director of national tax at ernst and young. The firm did a great deal of work setting up tax shelters for wealthy clients. In the process there were employees who were convicted of fraud and obstruction for covering it up. Ernst and young paid more than 100 million in settlements with the justice department, Internal Revenue service over its tax shelter marketing. In the vetting process for the nomination, it became clear that mr. Kauttier was regularly informed of decisions that allowed ernst and young to profit off tax gaming. Mr. Kauttier has told me he had no direct role in the marketing of those tax shelters or in misrepresenting them to federal auditors, yet i remain troubled that he was at the top of a department that engaged in these practices. This issues going to come up this morning and i look forward to that discussion. Finally, secretary for tax policy is a job that requires both communications with both sides of this committee. Over the last few months the administration has taken a lot of hits from republicans and democrats alike for its stated policy of ignoring questions that come from democrats. Im pleased that chairman hatch has spoken out against this policy as has chairman grassley. I want to be clear that it is completely unacceptable, unacceptable for an administration to just stonewall inquiries from members of congress. Members of congress dont do this for sport. We have an obligation on behalf of the millions of people we represent to ask tough questions, so i expect the commitment today to respond to questions from members of the committee regardless of whether or not they have a d or an r next to their name. Mr. Kauttier, thank you for being here. Thank you for visiting with me and i look forward to your testimony. Mr. Kauttier, do you have any comments youd care to make. Yes. Thank you mr. Chairman, and distinguished members of the Senate Finance committee. Its an honor to appear before you today. I feel both privileged and humbled to have been recommended by treasury secretary Steven Mnuchin and nominated by President Trump to serve as the assistant secretary to the treasury for tax policy. As a former tax staffer for a member of this committee, i have deep respect both for this committee and the institution of the senate. I look forward to the opportunity if confirmed to serve this country again. Id like to take a moment to thank my family who have been a constant support of inspiration and support for me. My wife cagey and two children. Id also like to express my thanks to those members and staff ta ive been able to visit with if confirmed i look forward to working with you in a bipartisan collaborative and ca lethal manner. I i grew up in a small town in the name of plymouth in northeastern pennsylvania. My father worked as an accountant and my father was a high school teacher. I spent the majority of my career as a tax practitioner and leading Accounting Firm tax departments. Im currently the partner in charge of the Accounting Firm rsms Washington National tax office. I ran the University Tax center. Prior to that i spent over 30 years with ernst and young. Finally im proud to say that i was senator dan forths tax counsel for over three years. I will always be grateful to senator dan forth for the lessons i learned and the values he instilled in all of us on his staff. He set a standard for excellence and service that has been a source of inspiration for my entire career. Through these Career Opportunities ive worked on many aspects of the tax code. At American University i focused on Small Business and middle income individuals. My current firm rsm is focused on middle Market Companies. At ernst and young and witness first hand the challenge of keeping American Companies Competitive Internationally. Comprehensive tax reform is the challenge before us. The current code is unnecessarily complex, anticompetitive and picks winners and losers. Americans need a simpler system when filing their taxes and the middle class needs a tax cut. U. S. Businesses need a tax code that allows them to prosper domestically and in international marketplace. Youve made great progress in identifying the policies that will achieve these goals. The magnitude of congresss tax reform work in terms of hearings, working groups and legislative proposals is indeed impressive. As a result america is on the verge of its First Comprehensive tax code overhaul in a generation. Treasury has an Outstanding Team of many of the most talented Tax Professionals in the world. Working together with you and your staffs, i believe we can get tax reform over the finish line. If confirmed it would be an honor to strive to do so. Thank you. Thank you, sir. Were grateful youre willing to sir. I have obligatory questions. First is there anything youre aware of that might conflict to the duty you have been nominated . There is not. Do you know of any reason personal or otherwise that would in any way prevent you from fully and honorably discharging the position of the offices to which you have been nominated. No, sir. Do you agree without reservation to respond to any reasonable summons to appear and testify before any duly constituted committee of the congress if you are confirmed . Yes, sir. Finally, do you commit to provide a prompt response in writing to any questions addressed to you by any senator of this committee . Yes, mr. Chairman. Thank you, sir. Youve been in the tax business for many years from tax policy to Tax Consulting and compliance. Youve worked with congress in administrations, tax practitioners, academics and other taxpayers. What is it that you would like to achieve as head of the tax policy that the Treasury Department and how have your years and experience and interaction with all facets of the Tax Committee prepared you to do so . Mr. Chairman, one of the things ive learned over the years is that taxes do impact decision making, both by businesses and individuals. And i think having an Internal Revenue code that is fair and simple should be a high priority and having a globally competitive tax system is critically important for american businesses. So if confirmed, id focus on increasing Economic Growth through the tax code, creating good paying jobs, a middle income tax cut and simplicity. I just have to say that, what are some of the important Things Congress can do to help americans save their hard earned time and of course their hardearned money as well complying with this overly complex tax code . Senator, i think an Internal Revenue code that has a broad base with low rates which means eliminating certain Tax Deductions and preference that exist today would be very helpful. The Taxpayer Advocate is estimated that the Internal Revenue laws exceed 4 million words. No one can comprehend that and so i think eliminating a lot of what weve got today in terms of preference, broadening the base, lowering the rate is essential for americans to feel good about the Internal Revenue code. I think none of us tend to trust things we dont understand and most americans have no understanding whatsoever of the tax laws and how they work, when 90 of the population either hires a tax return preparer or purchases software to prepare the returns. Weve got a problem and so i think we need to dramatically simplify the tax law as part of tax reform. Okay. The trade facilitation and trade enforcement act of 2015 requires u. S. Customs and border protections, cpb to promulgate regulations that the is responsible for approving. Some of these have missed their statutory deadline. Do i have your commitment to ensure that cbps regulation would adhere to statutory deadlines Going Forward including the prom youll gas station of the regulations necessary for simplified drawback procedure . Thats not an issue im familiar with but my personal belief is the responsibility of the exclusive branch is to execute fully and faithfully the laws that are passed by congress and signed into law by the president and if confirmed i do everything within my power to make sure treasury meets its required deadlines. You have interacted with small and large businesses. What are these businesses telling you is most important to them as part of tax reform . . What are the major themes youre hearing from large and Small Businesses alike as well . Larger businesses tend to be more globally active and so the focus tends to be more on a Global Competitive tax system including how foreign earnings are taxed. Small businesses are less concerned as a general matter with the Global Competitiveness of the u. S. System. Theyre more concerned with simplicity. One of the things that surprised me most when i moved to my current firm which is focused on middle Market Companies is how few businesses in the middle market have a tax professional. Businesses with revenue of 50, 60, 70 million have no one on their staff who focuses on the tax consequences of different decisions they make. And so i think having a simple straightforward Internal Revenue code for business that allows businesses to make decisions that make sense to them without being unduly influenced by the tax law would be a very good place to be. So different concerns at different ends of the spectrum. Thank you. And Profit Shifting or project that the organization for Economic Cooperation and development or oecd was intended to address concerns associated with perceived erosion of countrys tax basis and Profit Shifting. It was intended that countries who signed on to the final reports and moved Forward Together on these fronts. However, not long after the reports were finalized certain countries decided to go their own way and enact measures that went further than those measures described in the reports. For example, one of the reports dealt with tax documentation that would be prepared on a country by country basis and privately shared with certain other governments. However, there is a Strong Movement currently in some jurisdictions to make that information public. If countries collective agreed to do one thing but then go off and do another, what do you see is the benefit to the United States of participating in these tax discussions at oecd besides of course attempting to achieve particular consensus outcomes if you think the United States should maintain a presence in these tax discussions, what thoughts do you have on actions that could be taken to encourage jurisdictions and not take actions that are contradictory too or go further then agreed upon frameworks . Senator, i think its important for the United States to have a seat at the table in these discussions and i also think that it is important for the United States to make sure that those agreements we enter in to are complied with and so how we would deal with each individual situation i think would vary, but i dont know how we can have a globally Competitive International environment with a level Playing Field when different players play by different rules. Thank you, mr. Chairman. Thank you mr. Kauttier and thank you for meeting with me. When you were director of national tax with ernst and young you were responsible for tracking the amount of money employees in your department made for selling tax shelters that cost taxpayers billions of dollars. It was your job to count the money and as a partner of ernst and young you benefited financially as the money just in effect poured in. You also had a hand in designing the process of reviewing tax opinions that allowed this. It was a process that led to people going to jail and a 123 million fine. Yet, up till now, you have taken no responsibility for a very dark chapter at this firm. And in effect youve said, we heard you out yesterday, it wasnt my job to complain, not my job to blow the whistle. Now, it takes real courage to stand up when people around you are breaking the law. So the question i want to ask you is, in hind sight, at the least do you wish you had handled this matter differently . Well, senator, i was not involved in the decision to get involved in tax shelters and ive never designed or drafted one myself. Every time i think about ernst and youngs activity in the tax shelter area, i wish i done things differently. I tried what would you have done differently . You were the head of the department. This is a key question for me because this was a big ripoff and id like to know what you would have done differently. At the time the firm agreed to get involved in the tax shelter business i was not the director of national tax. The firm set up a separate reporting structure with respect to tax shelters which did not involve the director of national tax and when i took over that was the system that was in place and continued until the tax Shelter Group was dissolved. It was not until later when i was designated as the primary point of contact for the firm with the permanent subcommittee on investigations but i had a chance to really review in detail the email of that group. What i saw greatly disappointed me and i felt members of the group had abused the level of trust that the firm had placed on them. Looking back, i shouldve been more active. I think i played a bigger role. I should have been more vocal. I spoke up whenever i had the opportunity but i did not speak up as forcefully as i wish i had. And i feel bad about that. Because im just looking at all these documents that you were ccd on. Not one, but lots of them. And im going to have to consider your answer as we go forward because when you look at what happened there and the fact that you were copied on all of this and youre the head of the department, this was a major fraud and i may need to talk to you some more about this. Now my next question was on a matter that was very troubling to me. You said that you would respond to requests made by the committee, however, when you spoke with these people sitting behind me, you said that if the white house tells you not to respond to democratic members, you would follow that directive and ignore our requests. So which would it be . Are you going to be responsive to requests from committee democrats, even if directed not to do so by the white house or are you going to break the pledge that youve made to the committee . It cant be both. One or the other. Senator, i was when i worked here years ago, i was brought up to believe that bipartisanship was the way in which the senate worked. I still believe that today. I think Congress Makes its best decisions when it works both parties Work Together. The answer that i gave to the staff, i stated improperly or not as cratly as i should what i meant to say and continue to believe youre retracting what you said to the staff . Thats a yes or no answer. What i meant to say was that theres a legal prohibition that prevents me from responding. That is all that we will prevent me from responding. Other than that i intend to fully and quickly as possible respond to any inquiry from any member of this committee or the senate from either side of the aisle. One last question if i can get it in. Again, when i think about the tax code, i think about two systems. One for cops and nurses and its compulsary as i said and the other is the kind of system that we saw at ernst and young, where in Effect People who are fortunate and had the kind of talent that you had there, they can do a great extent figure out how to decide what theyre going to pay and when theyre going to pay it. So what do you see as your priorities to close these kinds of loopholes and get us to a system that gives everybody a chance to get ahead rather than two systems that are particularly end up being particularly hard on working families . This is talking about youve got expertise here because ernst and young was doing it on your watch, so what would you do to stop those kinds of practices . Id say two things, senator. The activity by ernst and young, the tax shelter area was a small part. It constituted less than the tax shelters are not part of the American Committee today. I will tell you what led to that is the complexity of the Internal Revenue code. Its all the gray that exists within the tax law and that is ernst and young is not unique. There are many tax advisors who were engaged in similar activity and it is the complexity that leads to that. My time is up. There is a lot more to this than blaming it on complexity. This is a question of whether in this job youre going to have the political will to take on these powerful interests that did so well at ernst and young and are still out there today. Im going to need to ask you some more questions about that. Thank you, mr. Chairman. Senator grassley. Thank you and congratulations on your nomination. My first question deals with the whole issue of whether we ought to have lower rates or expensing and which is more important. How do you see the tradeoff between expensing or depreciation in lower rates. Do you view it as acceptable to length depreciation to help finance a lower rate . Senator, i think different businesses would prefer Different Things, so professional Service Businesses with low investment and capital would prefer the lower rate, capital intensive would prefer more rapid write offs of their equipment. I think some members of this committee have developed very innovative proposals with respect to capital write offs which are some where between current law and dispensing and trying to simplify the rules for expensing and writing off Capital Equipment would be a very good thing to do there. Theyre exceedingly complicated and i think simplifying them and consolidating some of the existing rules would be a very good thing to do. What, if any, restrictions should be imposed on the ability to deduct interest . As you know the house blueprint generally eliminates in exchange for going to full expensing on capital assets. Do you view this as an acceptable tradeoff and should any restriction on the deductability of interest be considered to finance lower rates or faster depreciation . I think as part of tax reform everything should be on the table. I think we should look at the deductability of interest. There is concern among many that the Current Treatment of interest deductability leads businesses to excessive leverage. If something is done with respect to the deductability of interest expense, i dont think it would be wise to do it as a simple across the board change. I think theres some aspects of the economy that depend very heavily on interest and its critical that they have availability to interest to debt and to the deductability of their interest expense. A key simplification of the income tax is substantially increasing the standard deduction. For example, the Administration Proposed doubling it while generally only maintaining the deductions for charitable contributions and mortgage interest. However, at the end of the day the increased standard deduction means that only around 5 of the taxpayers would itemize to take advantage of either these two remaining deductions. How should tax he reform balance the important goals of simplification with a longterm policy goals of incentivizing Charitable Giving and Home Ownership . I think as part of tax reform if were going to do it right, senator, each individual tax provision needs to be viewed in the context of a comprehensive Internal Revenue code. And so looking at every provision of the tax law, i think makes sense and figuring out a new Internal Revenue code for the future, which is substantially simpler with lower rates, i think would benefit the economy and all the taxpayers a great deal. Theres a broad agreement that passthru tax rates need to be lowered in conjunction with any reduction of the Corporate Tax rate. In your view must the Corporate Tax rate and passthru be equal to provide a level Playing Field . Thank you, senator. Ive actually written on that and testified before the house Small Business committee on that. Over the years ive spent a lot of time focused on passthru businesses and when i was at American University the focus of the tax center i headed was on Small Business. At the time about two, three years ago there was a lot of discussion about eliminating a broad array of business expenses, business deductions and using that revenue to lower the corporate rate. My concern was that many of the flowthrus are Small Businesses and so i proposed at the time that maybe what we should have say single business rate structure for all businesses, for flowthrus as well as C Corporations. It could be a graduated rate structure but i was i proposed the single rate structure for all businesses. At the time i realize theres some significant problems with that. The biggest one probably is whether personal Service Incomes should be subject to those lower flowthru rates. Thats a question on which people can differ. I think thats significant. If its agreed the personal Service Income should be subject to that lower passthru rate, i think we need ways to prevent individuals from converting wage income into passthru income. The Biggest Issue and maybe to get directly to your point. There has has been a realization that C Corporations have two levels of tax and passthrus only have one and so while id like to see the passthru rate as low as it could be, i think it has we have to take into account the fact that there is a second level of tax on C Corporations that does not exist for passthru entities. Is that saying that there would not be some and this is my last question, that what you just said in the tail end is youre giving some consideration to a lower rate for passthrus as opposed to salaries or not . Yes, sir, but going back to my first point. I really think theres a serious question whether that lower passthru rate should apply to personal Service Income. In other words, if theres a corporate attorney in a Corporate Tax department performing exactly same services as an attorney with a law firm, it doesnt seem right to me that the attorney with the law firm pays at a lower rate of tax than the employee pays. Okay. Thanks. Thank you. Senator casey. Thank you mr. Chairman. Mr. Kautter. We appreciate you being here and i note for the record that youre a Luzerne County native. Yes. We dont have that happen very often around here so its good to see you. I wanted to i have some question for the record regarding the line of question that senator wyden pursued with regard to ernst and young. I wanted to ask you in particular, though, about the code and where we go from here. In particular i wanted to start with progressivety in the code . How do you preserve that . What are your views on that . How do you view that issue were you to be confirmed . Its been part of the code since its original enactment. My focus if confirmed will be on a middle income tax cut. I think reducing taxes for middle income taxpayers simplifying the law encouraging Economic Growth and generating good paying jobs are what i would focus on and so i believe in progressty and i believe it should continue to exist after tax reform. I hope that would be the perspective of the view of the administration that theyre going to focus on middle class tax cuts. Im afraid that that might not be widely shared in terms of a goal, because weve seen over a number of years that when Congress Enacts substantial and sometimes, i would argue, grossly excessive tax cuts for the wealthy, other parts of our society pays or other parts of the budget, schools pay, Research Investments pay for that cuts to nih or limitations on the investment. Everything from meals on wheels to programs that are now up for not just cuts but elimination by the administration. So i hope i hope the administration would adopt the view that the middle class should be the priority. So let me just ask it this way in terms of the tax cuts for the wealthy. If the administrations tax plan is not deficit neutral, how would you weigh unpaid for tax cuts against programs and services at that revenue pays for . Senator, my personal belief is that tax reform should be revenue neutral and saying that i think we should take dynamic scoring into account as part of that, but i think adding to the deficit as part of tax reform is not the best way to go. We might have a difference of opinion on dynamic scoring. We can get to that another day. What we have from the white house so far is a one pager, as you know, which is which doesnt tell us much but does give broad outlines. Yes, sir. Our sense is that the proposal the administration would move forward would be a repeal of all deductions save for three, charitable, home interest and retirement and this would result in an above the line deduction being repealed. So heres heres some examples what that could lead to. Youve got in that scenario, repealing deductions for hire education spence t expenses like tuition. So if if the overall tax plan gives a tax cut to those making say over a million dollars, how is that an appropriate tradeoff when it comes to a deduction that benefits those who need hire education . Sure. I think the discussion so far has been primarily on itemized discussions and education can fall into that. I think everything should be on the table as part of tax reform and im not i would not rule anything in or anything out at this point. I think there are very many meritorious provisions in the code, the challenges they create complexity and if confirmed would be glad to work with you and your staff on the issues that youre focused on. We could add to that list of subject areas or parts of the deductions where individuals would be impacted, educations one. Expenses for educators in our classroom, travel expenses incurred by army reserve members as well as others. Im wrapping up but i just ask you one final question. Can you guarantee that on average theyll be no absolute tax cut for the wealthy . Im not in a position at this point senator to make that commitment. I will tell you my focus is on the middle income taxpayer and that is why i agreed to take on this job if confirmed and i will give you my word that is my primary concern. Thank you, mr. Chairman. Centsenator cantwell . Thank you, mr. Chairman. Congratulations on your nomination. We had a chance mr. Kautter to talk about how i look at tax reform in trying to best think about an information age, that obviously one of the things that we want to harness is the level of innovation and continued development of new products and services and so what do you need to do to make sure that as we look at tax reform were focusing on the era that we live in and how to best capitalize on that . We also had the chance to talk about some of the challenges that comes with that as well and i mentioned two things, the Apprentice Program and Affordable Housing and wondered if you had a chance to think any more about those two issues, one ways in which we might incentivize a more rapid up take of worker training as opposed to the challenges that we face today and so didnt know if you had a chance to look at that . Ive not developed any thinking on that any further but if confirmed i would look forward to working with you and your staff to try to develop something that we thought made sense. And i will say i am sympathetic to that as someone who was a University Professor for part of my career and believes in the importance of education. I am a believer that education can make a difference and the apprenticeship programs which can i think youve focused on and pioneered in your home state have made a difference in many lives and id like to see that extended. And do you think that could be an applicable place for the tax code given that part of our challenge is people dont know where to go and spend their time and training. Were asking people to go make an investment and change is happening in a much more rapid fashion and people dont know where to make the investment so if we can short circuit that by getting companies to hire and then train, weve taken a lot of consternation out of the system . I agree. I think that is a serious issue for the u. S. Economy and for our competitiveness and i would look forward to work with you to try to develop something we could put in the tax law that would not be unduly complicated and efficient to deal with that issue. Thank you. And on the Affordable Housing issue, any more opportunity to think about that in the context of we really have a crisis in america now on Affordable Housing, though lowincome housing tax credit has been a great tool. I think the one thing thats been missing here is the discussion of how much weve been impacted as a nation in the growth of americans who now were in this unaffordable category that weve had a shift in the context of how Many Americans have retired and now are in the situation of looking at Affordable Housing, returning veterans, people who have fallen out of the economy in the down turn. Weve had a 60 increase in the demand paying more than 50 of my income for housing. The lowincome housing tax credits not an issue. Ive spent a lot of time on in my career. From what ive seen it works pretty well and i think as part of tax reform we should take a look at whether it can be made more effective and more efficient. I think everything should be considered as part of the comprehensive tax reform effort and i understand the goal lowincome housing tax credit and i think it is a worthwhile goal that we should continue and i think in this case what were looking for is your feedback that you can think about and give us something for the record is the tax credit drives 90 of the Affordable Housing. If you dont increase it, were not going to increase the supply. And so this is really more an analysis of the shift change and the population that is now experiencing these really dire situations and whether its a Worthy Investment at this point to increase the amount of capital put behind the tax code and i would just put one other note into this is that the discussion of tax reform is actually suppressing the amount of capital going at this point in time. So the discussion of tax reform is basically hurting us in this discussion because people are just sitting on their capital instead of making the necessary investments. So senator, it may be possible to make the lowincome housing tax credit even more affect tif and efficient than it is today and if confirmed id look forward to working with you and your staff to accomplish that. Thank you, mr. Chairman. Thank you. Senator enzi. Thank you, mr. Chairman and thank you mr. Kauttier for being willing to serve in this position. I enjoyed meeting with you and visiting and learning and i appreciate your experience and are pleased that we have a nominee that understands the challenges that businesses face in this complex tax code. In fact, to even understand the tax code. Youll probably have already noted that anybody with expertise coming through these committees has a lot of problems. Theres a lot of background that can be looked at and picked apart. I would like to mention that president obamas assistant secretary of tax policy, michael mcdockca had these words to say about our nominee. Beyond deep Technology Knowledge that is essential, dave would bring great leadership abilities, he would bring a calm, measured thoughtful approach. I cant think of higher praise than that coming into this position. Now, i also noted that you talked about businesses with no financial expertise, the ones with 50 to 60 million a year dont have cfo and i would mention that we have a lot of agencies that dont have any cfos as well. I noted that i want to congratulate of yellowstone park. I think hes the first superintendent of a National Park that got a chief Financial Officer instead of having a bot anist and i noticed in this mornings paper that cass per, wyoming is going to eliminate their city manager for having a chief Financial Officer. It does help to have somebody that can look through financial documents and figure them out. And there are a lot of people that dont have that kind of expertise. You have that kind of expertise and you have worked in taxes actually done them. Im also the budget chairman and i know that our nations on an unsustainable fiscal path so i appreciate your comments about having a tax reform being budget neutral. The Congressional Budget Office has made it clear that if current laws governing taxes and spending do not change, the United States will face deadly increasing federal budget deficits and debt over the next 30 years. Debt rised to 86 of gdp in 2026 and 2026 and 141 in 2046 exceeding the historical peak of 106 that occurred after world war ii. The prospect of such large debt poses substantial risks for our nation and presents policymakers with significant challenges. We need to take steps to reform our broken tax code to lay the foundation for longterm prosperity for all americans. And as ive mentioned before, ive been working on International Tax reform for some time so that we can be competitive overseas. If we do that, something in that International Area will help to right the ship by pulling the International System into the 21st century making us more competitive overseas and having the possibility of bringing more revenue back to the United States to be invested in american businesses. And ive been working with senator portman to make that happen. From a broad perspective, can you explain what the administration believes is the appropriate way for reforming outdated International Tax rules . Well, senator, the administration is supporting a territorial tax system. And more than that, i think the goal of the administration is to through tax reform to develop a Competitive International tax system. In 1986 the Internal Revenue code was stateoftheart. Other countries admired what we had done. We had broad a broad base, we had low rates and went to school on what congress had enacted in 1986. And they have broadened their bases and lowered their rates. And they went a step further. In 1986, a worldwide system of taxation was stateoftheart. Today a territorial system is what most of our Major Trading partners have moved to. With a worldwide system, u. S. Businesses are at a competitive disadvantage. Now, there are strengths and weaknesses of any system, whether its worldwide system, whether its a territorial system, but the fact of the matter is we are at this point out of step with the rest of the international community. And if we dont move to a similar system, a territorial system, i think were going to be at a competitive disadvantage. Thank you. Again, i appreciate your background and know that a simpler and less burdensome tax code will help american businesses and individuals to prosper. Its a thrill to have somebody that has hands on accounting experience. And i appreciate you making it through some of the pretty tough stuff that youll have to go through. But i look forward to working with you. Thank you. Thank you, senator, before i call on senator thune, let me make a couple points here. And then senator wyden will close out the hearing. Its important that we not cloud the record concerning mr. Connors work at ernst and young. Lets restate the facts. One, for nearly three decades David Kautter was a professional aterness and young and the committee has seen no evidence whatsoever that would call into question the honesty his honesty, integrity or good judgment during his work there. Number two, the firms tax activities were the subject of a permanent subcommittee on investigations inquiry including hearings and a report. No part of this inquiry found any hint of wrongdoing by mr. Kautter or reflected negatively on him in any way. Mr. Kautter has told the committee both in writing and in person that he had no involvement in creating or promoting alleged tax shelters. We have no reason whatsoever to doubt him. So ive got to leave for a meeting with the japanese ambassador, but i want to thank everyone for their participation today. Todays schedule was a bit more demanding than normal. I want to thank everyone for their participation. And, mr. Kautter, i personally want to thank you for your professionalism and responsiveness. What happens is we can partisan work of this committee. Turn now to senator thune. When he is through, understand the Ranking Member mr. Chairman, just before you leave for 30 seconds, has mr. Kautter said today and its something ill be weighing in the days ahead he would have handled matter of what happened at ernst and young differently. Yeah. And i was taken by that statement. Were going to have to have some more discussion about it. But i wanted the record to note that. Well, thank you. And i think thats good for you to point that out. Senator thune. Thank you, mr. Chairman. And if youll excuse me, youll finish up. Let me begin by thanking mr. Kautter for appearing before the committee today and your willingness to serve as assistant secretary for tax policy. We appreciate your participation in this confirmation hearing and obviously the position to which you would ascend is one of the most important roles in the executive branch as we press forward with tax reform. So thanks for your willingness to bring your expertise to this enormous undertaking. I want to talk for just a minute about the continued growth of the socalled gig economy. The issue of worker classification has taken on a greater importance. Historically the tax code and the irs have had a bias toward classifying individuals as employees and against independent contractors. But that view really does not square with the increasing number of internet platforms and apps that bring Service Providers together with people looking for those services and creating muchneeded jobs in this country. So i introduced legislation last week to provide more certainty for these independent entrepreneurs who are really building the gig economy today. Do you share my belief that we cannot afford to continue looking past the worker classification issue and the tax reform as a singular opportunity to modernize the tax code for traditional Business Models as well as a new models that are propelling the gig economy, the sharing economy and whatever comes next . Senator, i would agree with that. I mean, the rules governing classification between employee and independent contractor have been uncertain for decades. The irs issued a revenue procedure in the late 80s, which is sort of stateoftheart for classifying, it has 20 factors. Some of those factors are incomprehensible. And so i think bringing greater clarity to classifications between employees and independent contractors is an important thing to do. And i think tax reforms the right time to do it. If you were confirmed, would you work with me to address this issue as part of tax reform . Yes, sir. Id look forward to that. Thank you. Mr. Kautter, we have a once in a Generation Opportunity not only to modernize the tax code but also to refocus it on sustained longterm Economic Growth in this country. And i believe the two most powerful things we can do is lower business tax rates for both corporations and passthroughs and to allow businesses to recover their cost of their investments as quickly as possible. Both of these changes will allow companies to deploy capital and earnings into business growth, job creation and better wages rather than sending more tax revenues to washington for government spending. So i have two questions. One, do you agree with this view on lower business tax rates and faster Cost Recovery . And second, do you agree that these changes will have a macroeconomic effect on tax revenues that we should take into account as we develop tax reform legislation . Yes, sir. I do believe that both those changes would have a favorable effect on the economy. And i think trying to strike the right balance between lowering the rate and changing the depreciation rules by shortening them is an imprecise science but i think we need to focus on both as part of tax reform. Both very important. Okay. Well, i do too. And i hope that as we get into the debate, this committee and the full senate on tax reform that we will look at the macroeconomic impact that these changes, policy changes, could have on tax revenues and as we develop that legislation, but recognizing again that lower rates, faster Cost Recovery are the two things i think we get the biggest economic pop from. And we dont do everything we can to grow the economy. Id agree with that. Thank you. Thank you, mr. Chairman. Thank my colleague. Senator menendez. Thank you, mr. Chairman. Mr. Kautter, do you support the proposition in the president s proposal to eliminate state and local Tax Deductions . Senator, i think as part of tax reform we should look at every individual provision in the revenue code and everything we do as a comprehensive package. So i think every provision of the code should be on the table. And components of the tax reform package are interdependent i appreciate that. Im asking you specifically about this one. I get the broad picture. Its all interrelated. Whats your views on this one . I would say, senator, that it should be considered. Its hard to answer that question, frankly, in isolation. I think it depends on what the comprehensive package looks like. Well, whats the purpose of the state and local property Tax Deduction . In my experience it has been to avoid one of the theories was it was to avoid double taxation on the amounts paid in to state and local governments. So in your views of everything should be on the table, should the foreign tax credit, which is basically a subsidy for u. S. Corporations, the bigger credit they receive against u. S. Taxes reduces revenue to the treasury actually goes in essence in a sense benefit the countries in which they are getting their deductions from, do you think that one should be on the table as well . Yes, sir. And whats your views on it . Again, i would say i would give you the same answer i gave you with respect to the state and local tax. In isolation, i can see the benefit of a foreign tax credit. I can see the detriments of it. I think the key is how it fits into a comprehensive overall tax reform package. Let me express to you what ive expressed now to several nominees in different forms on different committees. Little difficult here to vote on someone because i understand it at the end of the day anyone whos nominated by the administration will ultimately pursue what the administration decides is his policy. Thats pretty clear. But you will have this is a very significant position. And you will have the ability to advocate internally at treasury and interagency processes. And its hard to vote for someone if you cant gleam from them what it is that theyll be advocating. So thats a problem with your answer. Let me ask you a different thing. For multiple congresses many members of this committee on a bipartisan basis have urged the Treasury Department to withdraw irs notice 200755 in order to encourage more overseas investment into the u. S. Commercial real estate market. In fact, 40 senators cosponsors the Foreign Investment in Real Property tax act that others and i introduced in 2013 that would have repealed the notice. These days thats an almost unheard of level of bipartisanship. Despite significant reforms we passed in 2015, the notice still has a Chilling Effect on investments in commercial property. It stunts investments from foreign pension funds, sovereign wealth funds, regular foreign individual investors who want to invest in and develop american property through reits. Since this was done as legislative action and not by congress, you, if confirmed, are in the position to influence the potential repeal of this irs notice. Will you actively review the feasibility of withdrawing this notice after you are confirmed . Senator, its not an issue i focused on a lot in my career, but i would welcome the opportunity to take a close look at it and work with you and your staff. Okay. Let me ask you one last question. If youre confirmed, you would be the point person in the Treasury Department for tax reform, which i share the views of many on the committee that its both long overdue and desperately needed. We havent updated it in more than 30 years, so its the right thing to do. But do you believe as something as important and all encompassing as tax reform should be done in open, transparentally for the public to see, do you believe that the finance committee should hold legislative hearings and markup something as important as tax reform is regular order preferable than reconciliation in order to obtain longlasting reform . Senator, i believe that congress does its best work when it works in a collaborative collegial across the aisle manner. When i worked here years ago, that was how we worked. The senator i worked for, senator danforth, required every tax bill that i worked on to have a democratic senator. I thought it made the legislation stronger and better. And my personal fiber and commitment to you is that if confirmed, i will do everything i can to always have an open door and to work across the aisle and to give access to both sides. All right. Thank you, mr. Chairman. Thank you, senator menendez. Couple of additional areas, mr. Kautter, just to get your thoughts on it. Sure. The administration seems to think that tax cuts pay for themselves. Thats the folks that are there now. Do you share that view . Senator, i believe that taxes do affect economic behavior. Ive seen it. And i think most economists believe that the taxes do affect economic behavior. There is a wide variety of views as to what that impact is in a complex economy. So i do believe in dynamic scoring but do tax cuts pay for themselves . The reason im asking is i happen to share the view that behavior is relevant. I remember when mr. Elmund head of the Congressional Budget Office and i asked him about the proposal you and i talked about, and he said, yes, we will score thoughtful bipartisan proposals as generating growth and revenue. That is very different than the proposition of tax cuts paying for themselves. So stay with this issue that in my view is different than behavior is relevant with respect to activity in an economy, but do tax cuts pay for themselves . I guess i would say ive never tried to resolve that issue in its full extent. But i do believe that they affect behavior. So i dont know that they pay for themselves. I just dont know. Okay. If youre confirmed, my guess is youre going to have to resolve that issue because certainly the people that you would join seem to share that view. Let me ask you with respect to another matter that we talked about and that is who ought to get the lions share of tax relief. Because to me making sure that the middle class get most of the benefit in an economy where the middle class and consumer drive it, that should be the central focus of tax relief. So in your view should the middle class get the lions share of benefits of tax reform . I do believe the middle class should be the focus, the primary focus of tax reform, yes, sir. Okay. I want it clear that i am not going to announce a kautter rule because we have had the experience of having mr. Mnuchin embrace the rule. Im just going to hold you to it. Thank you, senator. Thats what we talked about in the office. I think that is the clear reality. I dont know of any other place you can do to drive the kind of growth that we want without zeroing in on the middle class. Youre being spared having a kautter rule that the middle class ought to get most of the benefits. Let me say, senator, im grateful for your forebearance. Understand, were going to hold you to the fact that the middle class ought to be in your words, the focus, of tax relief. Which frankly is not what we saw in the campaign. In the campaign we saw lots of rhetoric, but then when you start adding up, you know, the numbers, it looked like most of the relief went to the fortunate few, a. And then weve got this onepage proposal, which i call shorter than the typical drugstore receipt where its very detailed with respect to the fortunate few and not very detailed with respect to the middle class. Anything else youd like to add . No, just express my gratitude again, senator, for the time that youve given me. And i will say probably in closing i think some of the work you and your staff have done over the years is some of the most creative and thoughtful work and if confirmed, i would genuinely look forward to working with you and your staff. I appreciate that. And were going to have some more things we want to talk about in terms of the discussion today, but i appreciate youre saying that not just because i think that judd gregg and dan coates, i mean these are really legislators who felt strongly about this and wanted to spend the time, if youre confirmed, youre going to really be going in there and playing catchup ball because the reality is in the 86 tax reform and i often talk to bill bradley about this, by this time in the year they had a very extensive bipartisan effort underway where they were regularly bringing together democrats and republicans and there had been a judgment that would be made that there was going to be a bipartisan bill, it had to be bipartisan and reflects the comment you made about jack danforth, who i also liked very much, feeling strongly about that. But here we are sitting in july and senator mccaskill is saying when is there going to be some bipartisan discussion. And when you open up your the wall street journal last week, it basically had all of the described as big six making all the tax decisions. And the reality is that you can probably find some opportunities to bully your way to a 51vote strategy with reconciliation. It doesnt make it sustainable. And in the case of the area you want to work in, it wont bring the certainty and predictability we need for real growth. Because what will happen is if its just a partisan bill, everybodys going to say, well, gee, that will just turn around, get repealed. The next time somebody else is in the majority. So to get the certainty and predictability that you really need for private sector growth, its got to be bipartisan and its got to focus on the middle class and ending this tale of two tax codes, as i call it. Because somethings way out of whack when the cop and the nurse has their taxes taken in a compulsory way and people who are fortunate get handled very differently. So on behalf of chairman hatch, i want to make it clear for the record that any member of the finance committee on either side of the aisle who has written questions for the record, we would ask that they be submitted by close of business today. And with that, the hearing is adjourned. A live look at the White House Press Briefing Room where deputy White House Press secretary Sarah Huckabee sanders will be holding todays White House Briefing taking questions from reporters there. That should be coming up shortly. Live coverage here on cspan3, and a programming note that when the White House Briefing wraps up today, well take you live to capitol hill where a House Foreign Affairs subcommittee is holding a hearing examining the u. S. Qatar relationship after a recent blockade by persian gulf countries. Again, that coverage from capitol hill coming up at the conclusion of todays White House Briefing, which we expect to get started shortly here on cspan3. Again, live at the white house waiting for todays press briefing with spokesperson Sarah Huckabee sanders. Shell be taking reporters questions here in the brady press Briefing Room at the white house. Our live coverage on cspan3 as soon as that gets underway. While we wait, heres a portion of todays washington journal. Our first guest of the morning is raul reese. He serves california as a democrat, the 36th district and also a member of the energy and commerce committee. Good morning to you, sir. Good morning. First of all, for those of you who dont know your past as a medical physician, what is that past . Well, i am an emergency medicine physician, board certified, in coachella valley. I went to harvard medical school. Went to Kennedy School of government, did my emergency Medicine Training at the university of pittsburgh and then went back to harvard to do a fellowship in International Emergency medicine where i received a masters in Public Policy and i went back. Before all of that grew up lived in a trailer park the first few years of my life, so i experienced hardship, poverty and was able to really understand why people suffer with the lack of care. And all the challenges that come with that. So from a young age i wanted to be a doctor to help fight for health equity, to help relieve that pain and suffering from communities like mine in coachella and all over the nation. And ive done a lot of work internationally as well in mexico and haiti right after the earthquake. And ive never held office before. I never participated in a campaign before my own in 2012. And i won and here i am. So with your background and experience then you saw the house pass its version of health care reform, you see the senate wrestling with it now, what do you think about the current effort and various tracks that might occur and what the end result might be . Right now the senate is dealing with a tangled ball of thread. Theyre trying to figure out what will work, what wont work. Theyre desperate to pass a bill for political reasons. And thats the part that is concerning because in the midst of this enormous political pressure, in the midst of chaos, everybody starts to think differently. They start to think what are their political needs above the needs of the people. And thats why im seeing this unfold im a little frustrated. Id like them to just step away from the ledge, have some reason, dont jump off this political nightmare bridge and think through what their proposals will do for the American People. And when you add the element of a time urgency to that and these artificial deadlines that they place on themselves, then it even clouds their senses even more. And what nobodys really talking about right now is this sort of chaos is creating even more uncertainty, even more instability in the market, in addition to what they have already said is the primary reason why theyre jacking up prices. Which is the uncertainty with the cost sharing subsidies that will help pay for copayments and deductibles for individuals. And thats why Health Insurance is going up right now. And they have to decide whether theyre going to stay in the markets, in the Exchange Markets, the individual exchange, individual Insurance Exchange markets, and they have to decide at what price theyre going to set their premiums by mid august. Sense of our give them stability so they cannot choose plan b which is astronomically high increases where in some states where the individual Exchange Markets is working is only about 8 . So you can call and ask questions of our guest 2027488000, post on twitter at cspanwj. Make the case that subsidies then, youve put legislation on this, how can they be sustainable particularly as Health Care Costs continue to go up . Well, thats the key. And you said it right you hit it right on the nail, pedro, is that the number one driving force for health, for premiums going up and health care is overall Health Care Costs. The costs of medications, the unit price of care at an Emergency Department at a hospital bed at an outpatient clinic. Were seeing transformation sparked by the Affordable Care act that will place reimbursements how many devices can you use, what kind of expensive medications youre going to bill your patient with, but more on the publics health. Ultimately thats why we have a Health Care System to produce a healthy productive population. So payments should be more on value base, should be more on whether the diabetic has a better controlled glycemic homeostasis, for example. Whether they are better able to stay out of the Emergency Departments because theyre better controlled. And so thats why we have these collaboratives. Thats why we have these initiatives. And hopefully we can bring down costs that way as well. Right now were in the middle of a problem. Premiums are going up, Health Insurances are leaving. We dont have to radically change or repeal the Affordable Care act to make changes to put it back on the right path. We dont have to do that. Republican senators, Republican House members have mentioned that funding csr is the number one thing we can do right now even if its temporary to bring stability and to avoid catastrophe. And thats very frustrating as an emergency physician knowing that the President Trump administration and the Republican Senate and some house members know that there is a treatment but theyre withholding that treatment. And so you have to ask why and what are the political motivations. For me its like if you have a patient with pneumonia in your hospital bed and you know whats the right thing to do and you know that theres an easy treatment for that pneumonia and the antibiotic but you withhold that antibiotic so that that patient starves for oxygen even more with an infection, and whats worse is doing it intentionally or threatening not to pay the cost sharing reductions like the Trump Administration has done month to month is like turning off the oxygen tank. And in medicine that is contrary to everything that we believe in our oath of do no harm. So here are three simple steps that we can take right now. One, do no harm. Two, stabilize the market. And three, take care of the patient. What do i mean by that . One is do no harm. In other words, do not try to hinder a Young Healthy persons ability to get on the exchange by shortening the enrollment period, by using funds that are supposed to be to outreach instead using to advertise against the Affordable Care act. Two, stabilize the market. You need to fund the csrs right now. Right now, immediately. Two is, the reInsurance Programs, like an Insurance Program for the Insurance Companies, so if they get it right, dont get it right, those that do get it right can help pay into it and help the overall Insurance Companies themselves to bring stability to that market. My bill is called the marketplace certainty act. That will permanently fund csrs and increase support for middle class families by increasing the eligibility to 400 federal poverty level. Got ya. That is a key instrumental antibiotic for this pneumonia patient which is our Health Care System. Okay. Dont mean to interrupt you, i just want to have folks talk to you. Absolutely. First call is from arizona, democrats line, youre on with our guest. Go ahead. Caller good morning. Good morning. Ive been thinking about this for a long, long time. I was involved in being a Maintenance Mechanic and making sure that the equipment ran. If it didnt run, to get it running again. And its like you think of the outcome, you know, but when we have been for all the inception of this country since its been about business weve forgotten about the humanity of, you know, of people. We can get back to that when congressmen make laws. If they were to say five Different Things before each amendment or laws, these five Different Things and then they would get support. The first thing would be to promote the general welfare and especially to do anything to do with health care and get Insurance Companies out of the way because its all about money for them. Thank you, caller. Well leave it there. First of all, i have a soft spot for mechanics because my dad was a mechanic out in the fields, my parents were farm workers and my dad fixed machines and stuff like that. One of the things i learned out there working with him or in the packing house was that any system has an output as an outcome like this gentleman said from arizona. And the output should be the well being and our humanity, the absence not only the absence of disease and illness, but the promotion of wealth and happiness. And were very good at in this country at treating very complex, very critically ill patients. Were the best. We have the technology. We have the skills in the icu, et cetera. We use our very expensive tools to get that done. What were not that good at is the promotion of wellness and happiness. And thats whats going to help us keep costs down. Thats whats going to make all of us feel better, more productive and live more fruitful lives with that humanity that we care for each other. So i think having that in mind is going to be very important as we move forward in figuring out ways to reduce Health Care Costs. Republican line, georgetown, texas, youre next. Caller yes. Glad to have the congressman onto discuss do no harm as he said. Government does tremendous harm. And i would like to discuss that on what hes done to prevent the chaos that government creates like the Health Care Crisis that we have. We had no Health Care Crisis until government created a Health Care Crisis. We had no Energy Crisis until government created that in the Global Warming chaos dealing with something that is just not based in fact. And President Trump has been trying to drain the swamp. Democrats and holdovers from the Obama Administration have been constantly resisting and obstructing. I see this morning a scientist whos been reassigned, hes a Global Warming advocate, and hes been reassigned so hes on cnn as a whistleblower. And we taxpayers are paying for all that. Thanks, caller. So i think that when we look at health care and its now in the news and there seems to be some chaos because of the senate and House Republicans are infighting and they dont know what theyre going to put out there, i think thats different than saying that there was no problem or no crisis with health care before the Affordable Care act. The whole reason why the Affordable Care act was created because the costs were astronomical for people that were sick, people who had insurance were not covered for basic things like emergency care, pharmaceutical drugs, women were charged more, people with preexisting illnesses couldnt get Health Insurance or were charged so much that they were priced out of the market. So there were some failures in the market that the government in order to stand up for vulnerable populations, in order to stand up for the middle class and for Everyday Americans wanted to remedy so that people can be rest assured that they can get health care. Now, 20 million more people got Health Insurance. Kids are now able to stay on their parents Health Insurance until theyre 26. People with diabetes, chronic obstruction pulmonary disease, preexisting illnesses can no longer be denied Health Insurance. That is astronomical transformation of our ability as americans to demand the right to get the care that we need when we want it. Now, we can move forward, or we can move backwards. And people tell me this all the time about, you know, well, i hear this on tv and around d. C. Well, democrats are obstructing. No, listen, if you present to me and say, well, lets Work Together and we have wanted to Work Together since day one. We want open hearings. We want to sit down at the table. We want to be invited. But were not going to agree on anything thats going to harm the American People. Thats going to take away Health Insurance for millions of people. Im not going to compromise my value of making sure that people have health care, making sure that we improve their ability to health care, not deny their ability to health care, not take away the protections to get coverage. So i think that we have to, again, i encourage the republicans come off the ledge, lets talk. Lets sit down, lets come up with some easy proposals to stabilize the market to provide care for individuals who are in counties that dont have Health Insurance like maybe let them go to the d. C. Exchange. Thats where i get my Health Insurance from. And other members of congress. We have to get our we have to purchase our Health Insurance in the d. C. Exchange like all the other residents of d. C. Have to purchase their exchange we had one caller said you have to purchase it from the office of management and budget itself. I purchase it from the d. C. Exchange and all my staff do as well. Thats part of the Affordable Care act was we have to buy our insurance on the exchange like everybody else. And also lets keep in mind too that what were talking about here is the vast majority of americans get their Health Insurance through their employers, right . That is overwhelmingly the vast majority. So these changes that were making is in a smaller percentage of the population that are uninsured, that dont have a large employee employer based Health Insurance. Or their Small Businesses dont provide it. So this allows them instead of being uninsured to purchase Affordable Health care that provides protection. Raul ruiz from california joining us. He serves the 36th district. Next call is from pikesville, maryland. Independent line. Lewis, hi. Caller yes, how are you . Thank you for taking my call. Im retired position who practiced in baltimore for over 40 years and was one of the blacks to finish university of maryland medical school. And what we established back then was we got a medicaid grant from the state, we set up one of the first hmos call the Monumental Health plan in which we integrated our private offices connected to the Public Health clinics and we gave the medicaid patient, which at that time was a nebulous kind just starting and we brought these people who were treated as cattle before, we gave them accessibility, we had call systems at night, we gave them something to swallow their pride because we called them by their last names, not their first names, and the physicians did not change every july 1st like in the resident system you get new physicians every july 1st, so they gave them continuity of care and quality of care. Now, the government set a fund, amount of money they paid us per capita, and we lived within that. And the beauty of it is that the government did not have to supply employees or office space or anything. We supplied the office space as a contribution, so we took that expense off the government. But the patients had the first time in their life a private physician who covered them 24 hours a day and not a resident emergency room system. Lewis, thank you for the input. What do you think about that approach, doctor . You know, i think in his particular case what they started with back in the day was pretty horrendous. And the key point that the doctor said was that these are patients that when they were called by their last name was shown respect and dignity. So i think that was very instrumental what he said. Changing medicaid to a per capita Block Grant Program is the most disastrous part of the Affordable Care act. Repealing the expansion of medicaid from the aca and the changing in the Block Grant Program there are some estimates that say 50 Million People alone from those changes will be more, will be uninsured. What will happen is that the federal government will say this state gets a certain amount of money. It wont account for epidemics, it wont account for disasters, et cetera. And then the state is on the hook for everything else. Okay. And the state already doesnt have enough money to pay for their medicaid programs, so when they get less money, theyre going to do three things. One is theyre going to reduce payments even more to physicians, nurses, clinics and hospitals. And this is why so many rural hospitals in republican states are very concerned with this proposal and in california, new york, et cetera, my district i have two hospitals that are frightened by the prospect of decreasing reimbursements for medicaid patients especially because over 50 of their patients are medicaid. The second thing states will do to save costs is they will change their eligibility rate, meaning that less and less people will be eligible to be on their state medicaid program, so there are going to be more and more people that are going to be uninsured. Finally, theyre going to change the benefit structures, so those expensive cancer medications, those expensive treatments or maybe that extra day in the hospital that you need, theyre going to cut that as well in order to save money. And thats whats going to be so disastrous to so many families out there who rely on medicaid. The senate, one of the proposals is the skinny plan which would keep people not people, require people to buy not provide force insurance force employers to give insurance, and then also the medical device tax. If those were to pass, what essentially happens to the aca . Well, that in and of itself will not be the repeal law that is going to be passed. We know in order to get more people into the market and reduce costs for everybody, there has to be some incentive. The Affordable Care act created the individual mandate. Im have been open to changing that into an auto enrollment, because the individual mandate slaps a fee for somebody in april when theyre already struggling with their costs and they still dont have Health Insurance. So instead of slapping a fee and leaving the person without Health Insurance, why dont we automatically enroll them and take some amount of premiums, lowest cost premiums out of their monthly check and at least theyre paying into a system and they have some form of protection with Health Insurance so when they do go to the Emergency Department they got care. So i think this vehicle with the skinny plan is just a hail mary. Its like throwing a lifesaver to the republicans so they can play hot potato and put it back into the house and go into conference so all the attention isnt on the senate republicans. Thats the only reason why theyre doing this is so they can find out what is the most politically feasible thing they can get done in the senate so that then they can take it to conference. And then youre going to have the House Republicans, the Freedom Caucus and the moderate groups, that are going to go and debate what is acceptable for them or not. Now, that is that may be acceptable for them. And if they choose that with their plan that they had passed in the house already, then all those that said, well, i just voted for this because i know the senates going to improve it are on the
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