Thank you very much again for being here. Thank you, gary for joining us. Bright and early. The topic is taxes, taxes, taxes. Well start off with alabama. Original. We had a lot of discussion about taxes with your colleague last night chl well go over that ground and more detail. And ask more some of the more longer term questions. Let me start off with something i did ask secretary last night. See how you answer it. Why is now a good time to be cutting taxes to be increasing the deficit significantly. Know estimates vary. This is a 1. 5 this will Immediate Tax cut. 78 of gdp. Total revenue is about 17 . Quite low. The economy is close to full employment. This is seems an unusual time to add such a huge amount to the deficit. Why now . So let me take that question into piece ts. You ask a loft different pieces in there. Lets start with the core issue here. When you look at whats happened to the u. S. Work force since the recession, yes we have created jobs. Were at 4. 1 unemployment right now. 16 year low in unemployment. Even if you look at last month unemployment report, which was a good report. We had 0 wage growth in the United States. We have had many years right now of zero wage real wage growth. Wages have been growing in line with low inflation. One of the big drivers of our tax reform policy is to get real wage growth back into the United States. And we think thats really important. Something that American Workers deserve. They deserve real wage growth in the country. And so when we talk about lowering taxes on businesses, small businesses. Big business, every business in between. One of the results of that we believe is that businesses are going to be able to pay their workers more. Theres going to be competition for labor. And when you compete for labor as you expand your business, well drive real wage income in United States. And we believe that is very important. And the effects of driving real wages are pretty dramatic on the economy. We know that individuals know how to spend money. Much more efficiently than government. The Multiplier Effect of individual spending is substantially higher than the Multiplier Effect of government spending. Isnt surely the way that wages are going to rise through a Competitive Labor market u you have seen unemployment is down at 4. 1 . Theres issues about Labor Participation rates. But clearly the pool of the available workers is drying up. Now that hasnt had the effect of dramatically increasing wages. But the general expectation is actually the wages will start rising. As the economy operates at full employment. The wages will rise as competition for labor increases. Why does it need a tax cut addressed to business to do na . We havent seen that. We keep talking about what should happen. And what could happen and what might happen. But we havent seen any of that happen. What we have seen is we have seen companies acting as good fa touc and Small Companies thinking about how to drive earnings. And we have seen them use International Models and out sourcing models. We have seen them move employees over seas. We have seen them move ref knew over seas. Thats rational human behavior. So we need to combat that. And we need to make the United States competitive. Where we can drive wages in want country. One of the biggest reasons the Bigger Companies are able to provide wage increases is because they have good earnings. And during the cycle. But all of those earnings are trapped offshore. And the penalty to bring that money back on shore is too high. So kpaep Companies Just leave that money and it builds up offshore. In spite of good earnings it hasnt made its way down to the worker. Why not just again if this is about raidsing wages, why not just have the middle class tax cut. Why not the bulk of the tax cuts be directed at the personal level instead of what you have is both the house and senate plan have the tax cut is essentially a Corporate Tax cut and the personal side balances because of eliminating deductions. Why not direct the tax stimulus at the wokkers . This is where theres a misunderstanding. People really arent getting the details. So if you take the tax cuts the tax simplification apart. This is not sophisticate td data. This is ready available. And you look at whats in there, sh there are close to 6 trillion of tax cuts in the plan. Its 6 trillion. There are close to 4. 5 trillion of base broadeners in there. That nets to the trillion everybody wants to talk about. When you look at close to 6 trillion of tax cuts, many, many of those are in the middle class. So the way it works is when youre moving all of the different pieces of tax around, a lot of that is going even just the increase in the child tax credit. You have it slightly different plans in the house and senate thats, its 7 or 800 billion tlars by itself. Just the increase from a 1,000 of refundable to 1650 in the extra 650 nonrefundable. Thats 800 billion by itself. Right there we talk about theres no money going to the middle class. Right there is 800 billion going to hard working families. There is no question the median someone on the median income. It varies a bit. You have this effect in the house where that tax cut that someone gets immediately does fade away. As some of the other effects take place. Theres a reasonable size tax cut for someone on median income. Remember, in the house plan, just so i dont want to let that point drop. The house plan in there to get in there Budget Constraint window, they have a 5 year window in a longer window. They have two things that disappear at the end of five years. The immediate expensing and the 300 credit for taxpayers for the spouse and independence. They do disappear at five years. Its the assumption of the house members that if our plan creates the commission stimulus we believe it will create that those plans will get elongated and the 300 will be permanent. When people show you the cliff in 2023 dh everyone loves to show. We believe that cliff will disappear. If and when we get the Economic Growth we think well get. You again, u. S. Growth has been about 2 for the last ten years. Disappointing by historical standards. And the president of the certainly the believes your economist believe you can get it to three. Lets understand whats been going on. A large part of the reason why growth is dropped the trend growth seems to have dropped from 3 20 years ago to 2 today. Seems to do with demographic. Ageing work force, fewer people coming into the work force. The birthrate 20 years ago was lower. And by the way thats a global not just the u. S. How does a tax cut change the other phenomena is productivity. Has been weak. You just answered lt the question for me. Thats global. Weak every. How does the u. S. Whats going to go on here with the tax cut aimed at business that will raise productivity . Its about productivity. If you look at the last time our economy really took off, it was a productivity boom in the country. We need to get productivity back growing again in the country. We believe we can do that. One of the big components of the tax bill is a five year, day one immediate. No matter which plan we go with. Is day one immediate expensing. For capitol expepdture. We do believe theres a enormous amount of capitol expenditures that can be spent in the system. That will really enhance productivity in the system. We need to get workers producing more per unit of labor. We need to be more productive and more efficient in the system. Your question before on Artificial Intelligence is really interesting. We continue the develop Artificial Intelligence. More companies to invest in automation. We will create more and more productivity. So that five year window of immediate expensing thats aimed at jobs number one. Really productivity equally as jobs and trying to create productivity gains to get the economy growing. We have seen this extraordinary expansion of the Technology Sector this enormous investment theres been in Technology Many 25 years and the revolution in peoples lives and the way bids work. Theres no increase in productivity. Its declined. Its one of the mysteries of modern economics. So that investment you have seen is not actually improving productivity. Thats global. We have seen this weakness in productivity everywhere. How will that change . I would argue its a multiple factor model. The Regulatory Environment is had a huge impact on productivity. And the fact that we have over burden companies with regulation and that companies are spending so much money on what we would consider not productive regulation. In the cost and associated with that nonproductive regulation. Is chewing up amount of the earnings they cant reinvest that into whats really productivity and product of assets. That matters. I know you talk about this last night. And we continue to talk about rolling back some of the regulation. That makes us less effective. We need to continue to roll back that regulation. We need to make businesses more competitive. Im not looking to deregulate businesses. Were looking to make businesses efficient. Looking to have properly regulated. Were also looking to allow them to compete. And be more productive than businesses around the world. That could be a competitive edge. The government shouldnt be stifling growth. It should be encouraging. With proper guardrails. What data are you seeing that suggest business in the United States is not come pet ti. And not productive. You see profit shares very close to all time high. Way up on 20 years ago. You see stock prices up 30 in the last year. Shareholders have done extremely well. Companies are making profit. Investment is down. How is it again im not sure what it is that Business Needs right now that is actually answered for by a big tax cut. We Want Companies to invest back into the economy. Not give money back or sit on money because they dont think theres anything to do with it. There should be enormous amount of opportunity in the economy right now to invest capitol. Into our economy. Thats what we Want Companies to do. The reason theyre not doing it is because its really hard. If you want to create a new mine and theres company in the United States trying to create a copper mine for 15 years, and its literally tens of thousands of jobs in arizona. They cant get permits. Thats a regulatory issue. How is cutting the Corporate Tax rate to 20 we have to fix the entire system. I was talking about productivity. I was talking about deregulation. Im there, the ability to expense all of your capex on that in the first five years, if that mine made since 15 years ago, it makes more sense today than it did 15 years ago. The economics to do that to make that investment today when youre looking at after tax returns, or or whatever you want to look at after the ability expense up front. And the ability to look at that with a lower task rate. Even when you pay your employees more money. Which youre going to in a tight labor market. Will make more sense. Which will drive Economic Growth. Let take a poll question. Which we have here. You know the drill. Open up your app and here we are. The question is will Congress Pass a major tax reform by the end of 2017. Were seven weeks away. Yes, no, depends on what happens in alabama. So far. There we go. Thats little bit of pessimism in the room. Surprises me a bit. Youre very confident. We were talking about this backstage. Again, theres a lot to be worked out. House bill and senate bill. Amendments to both. Reconciliation and conference. Youre confident this is going to get done. So, lets take a real look at where we are today. Last week regot the house bill through the committee with 24 votes. 2416. This week were in the Senate Finance committee. I think there were 350 amendments filed. They had to be filed by sunday at 5. Washington trick. Sunday at five. 350 amendments filed by sunday at five. The the Senate Finance committee will work all week to get through the bill out of the Senate Finance committee. I assume, i assume. That before they go home for the thanksgiving recess kp by the way theyre scheduled to leave thursday night. Only in washington wrou get a week for thanksgiving. I assume they get the bill through the Senate Finance committee. That will be thursday or friday of this week. The house is scheduled to vote on the full bill again on thursday. I am confident that the house is going to vote on the full bill before they go home for the recess. Again theyre scheduled to leave thursday. By the end of the week, the before we get to the recess which starts this week, we will have the whole the bill through the house, we will have the Senate Finance committee done. The only thing left to do is to get the full senate to vote on the bill. Then at that point we may we may need to go to conference committee. Create a bill that both can agree on and send it back to both chambers to be voted on. So i think theres a loft people that you ask the question four weeks ago by thanksgiving would we have both bills out of committee . You probably would have got similar results. Is it important to have it done by december 31st . People in the house want it done to have a bill in place for the new tax year. Or youll settle for it if it drifts into the new year. Its important to get it done. We have to get taxes done year. The legislative calendar is going it get very crowded. Come the first, second week of december. There are a bumpbl nch of issuet got punted. December will get very crowded in the legislation. Few potential wrinkles still here. I asked treasury secretary and i see the president tweeted about one of them. I want to ask about that. This plan by senator tom cotton. Supported by people to reintroduce the removal of the individual mandate. Obamacare individual healthcare mandate requiring people to sign up for health insurance. That would save significant amount give you additional revenue to play way. 340 billion. Cotton saying hell do it. Trump supports it. There are concerns once you start pulling on that string which is called obamacare as we have seen for ten months, all kinds of difficult things arise. Do you think its that would you welcome that . Were highly supportive of it. It comes down to whether the house and the senate have the votes. And i think its more of a question as the senate have the vote. We have already voted on obamacare. We have shown you we delivered the votes. Can the senate deliver the votes. Tax reform is really important to us in the administration. Its important to the house and senate. We have to get that done. If we can get the individual mandate repealed as well and incorporate that, that to us is a real win fall. And wed love to see that happen. Were plotting ahead of tax reform. Whether it happens or not. A few specifics. I want to open it up for questions, too. The state sdp local Tax Deduction elimination. Republicans in hightech states are upset about that. The house has at least some allowance for a deduction on property taxes. Senate has none at all. You prefer the house or Senate Measure . Hit very hard who pay a lot state and low and taxes. Its not a proper characterization. The question should be is do the bills deliver middle class middle income tax relief . The answer to both is yes. How they get there is different. Remember, the house went with four tax brackets. The senate went with seven. Remember the seven has a 10 bracket. House a 12 tax bracket. Theyre finding different ways to company sate for the different issues. The only way to grade whether its tuck seszful or not is to look at the table, look at the distribution. Say does this do what we want it to do and does this deliver tax relief to hard working American Families . And the answer to both bills is yes, it does. Yes they attacked it different ways. They fwet get to the same answer. Your message to the republican congressmen in new york sdp california and illinois. And new jersey. Who are worried about this is sorry too bad. Youll get middle class tax cuts and those people will get hit in your district. Youll have to take your lump. Is that the message . Were delivering middle tax class relief to people in your district. And running tax returns for people in your district. We have run literally i dont know how many wech run. A lot of returns for a lot of people. In what you call the salt districts. Let me ask you housing. The bill to get the house bill again and the senate bill slightly different again. Would cuts the be allowable the mortgage Interest Deduction to half a Million Dollar loan rather than a Million Dollar loan. The doubling of the standard deduction will eliminate. For a lot of people mean theres tho point in anymore deducting their mortgage interest because they have something below the standard deduction. Theres a lot of concern in the housing sector. Lots of lobbying going on. This could really cause a lot of damage. I knee people think half a million and had a Million Dollar loan maybe that effects the wealthy. Theres a lot of people with loans in that range. In some way outside the upperest side of manhattan and Silicon Valley and Beverly Hills theres concern this could do significant damage to the housing sector. Did you worry about that . Do you think the bill is going to be fine. And we can live with it. I worry about everything. Of course i worry