Good afternoon everybody would i want to welcome you all today i am peter russo, director of affairs at the cato institute. I want to thank you for coming. You are an old briefing of major tax reform in 2017. Before we begin if youre watching via cspan for live stream and would like to join the conversation would love to hear from you. Please to comments and questions to us and our panel at cato events. We released a new policy handbook. They were available as you came in. If you like additional copies please contact me after the program. I will be happy to hook you up. Meanwhile you can go to cato. Org and theres a chapter here and federal tax reform and many others also covering the treatment of healthcare and as well as the importance of global tax competition. With that i introduced chris edwards. He is a top expert on federal tax and budget issues. Before joining us he was on the joint Economic Committee and he was a coauthor of global tax revolution. [applause] thank you. Thank you peter for coming here. I think some of you might have had to avoid the president ial motorcade there on independence avenue. It was a bit of a nuisance but you are all here so that is good. I want to provide a brief overview of tax reform introduced the three speaker say. Jd foster, Jason Fichtner and check for the basic idea is to cut individual and business tax rates to close loopholes and improve the treatment of the investment. So why do we need tax reform . It can spur more Economic Growth, raises Living Standards for everybody. Tax reform can simplify the code and it can also increase fairness by creating more equal treatment between taxpayers. The other reason we need tax reform as we have not had a major tax reform since way back in 1986. The world has dramatically changed over the last three decades. International investments have exploded. Entrepreneurs and wealthy people and businesses have far more choices where to invest in the global economy. We want businesses to locate here in america so we need a competitive tax code to make that happen. If you look at Corporate Taxes the last time we cut the Corporate Tax rate was back in 1986. Before that the combined federal and state Corporate Tax rate was about 50 percent. Which was above the average of the other countries at the time. Then we Corporate Tax rate in 86 but that launched sort of a global revolution in Corporate Tax cuttings. Rates have plummeted. The average oec Corporate Tax rate has been slashed in half since the mid80s from 48 percent. The highest taxes in the world. Many heard that ivan has a 12 and a half percent Corporate Tax rate. That attracted a lot of investments. But hong kong has a 15 percent Corporate Tax rate. Taiwan and singapore 17 percent. If your building a Semiconductor Plant for example would you put in the United States and pay 40 percent or would you put in taiwan and pay 17 percent . Even some European Countries have remarkably low Corporate Tax rates. Portugal which is to be a real this is has 21 percent Corporate Tax rate. Sweden which is the supposedly socialist country that a lot of american liberals admire has a 22 percent Corporate Tax rate. Ryan will discuss that the uk has dropped its Corporate Tax rate to 19 percent today. What are we doing here Jason Fichtner our 40 percent tax rate makes absolutely no sense. Looking at the individual income tax and again rates are falling around the world over the last couple of decades. Back in the mid80s the average top oecd individual rate was 64 percent. Back then our top individual rate was 65 percent. So we had an advantage on that for a while. We cut our individual rate back and shes sick. But other country started cutting as well. But we kept our advantage in individual tax rates for most of the last three decades up until 2013. The deal that ended part of the bush tax cuts pushed our top individual rate back up again. And our rate now with state taxes about 46 percent which is above the oecd average of 44 percent. So we are not a low income tax country anymore. We are a high income tax country. This is a problem. High rates of the top and really matter. Does it punish the most productive people in the us economy. Entrepreneurs and Brain Surgeons and venture capitalists, people like that are very responsive to tax rates. Also, a large amount of business income flows through the top brackets. So high tax rates mean less investment and less work effort by the most skilled people in our economy. So that is the overview today and i am going to introduce our three speakers and turn the podium over to jd first. Jd foster is chief economist at the us chamber of commerce. Before that, jd was a senior fellow at the Heritage Foundation and before that chief economist at the omb and advisor at the u. S. Treasury. In 1990s he was head of the Tax Foundation where he was my boss. Jd was a very good lesson i learned a lot from him at the time. Jd also work on capitol hill for a number of members. He received his phd in economics from georgetown. Next after jd we will hear from Jason Fichtner. He is a senior fellow at and i would add george mason university. He focuses on tax policy. He was Deputy Commissioner and chief economist at the Social Security administration. Also senior economist at the joint Economic Committee where i was a coworker with him. He has a phd in Public Policy from Virginia Tech and the author of the hidden cost of federal tax which looks like that. Which is an excellent overview of the topic today and actually free on the internet. So that is a pretty good bargain. Finally we will hear from ryan born he researches all kinds of Economic Issues including tax policy. Before joining cato he was head of Public Policy at the institute of Public Affairs in london and also head of Economic Research at the center for policy studies in london. Ryan has written extensively on Economic Issues in the uk newspapers and holds a masters degree in economics from the university of cambridge. I will hand over the podium not to jd. Thank you chris. Hello everybody. In about two weeks, we will be subbing memorial day. You may find yourself at some point over the weekend watching the ballgame. If you like a golf match or maybe nascar. In the course of the program there is a likelihood you will see a commercial that also he was probably see car commercials. Those would be along the lines of someone driving on a winding road. We get to do that a lot in dc. Out in the open road and they will be advertising this is the great memorial day sale, low Interest Rates on loans, slashing prices. Why do they do that . Why advertise that way . Because people respond to prices. Prices align what happens in our economy, it aligns supply and demand. People and businesses respond to prices which you will not see in all likelihood, all car commercials or any others saying my car is just as good as that guys car and it costs 5000 more. Youre not going to see a lot of advertisements advertising that people have higher prices than someone else. It might seem kind of obvious but the us economy has now for a great many years been advertising to the world come to the us, we have the highest tax burden. Not in total tax burden but in terms of rates as chris was just discarded. We been advertising for years that we have an extraordinarily punitive tax system. We also have been imposing a lot of regulations over the last eight years on the economy that also has been telling the world come to the us because were making it a lousy place to do business as we can. While that obviously is changing at the moment. Were trying to get it change in tax policy. In 1986 the last great Tax Reform Act we learned and then reminded the rest of the world how important low tax rates really are. And shortly after the Tax Reform Act we forgot. And it stayed in place pretty much for that. Until today. Meanwhile the rest of the world learned a lesson and they were reducing rates over and over. One country after another. In fact, recently in france Emmanuel Macron was elected as president. Here is that he was in the socialist government distinguishing himself by calling himself a probusiness socialist. I get it that is how you define a centrist in france. France understood that they needed to lower the rates. There top rate and Corporate Income is already below ours. 33. 33 percent pure he ran as a french socialist now centrist to reduce the rate to 25 percent. It is amazing even the french get the fact that you have got to lower your tax rates to be competitive. In a recent president ial election bill clinton gave a speech and noted that yes, when he was president he signed a bill raising the tax rate on Corporate Income but he did so to make that rate competitive with the rest of the world. We pulled our rate down the world had completed the process of reducing their rates. So he said it was okay to raise the rate but now it is not. Now we have uncompetitive tax rates on business income and bill clinton during the campaign sent, we need to reduce these rates. I think that is a pretty good observation on his point. That is really from a business standpoint. What tax reform is all about. It is not a complicated exercise. It is pretty straightforward. The first thing you have to do, we have to get significant rate reduction. I will not say how far down. Sort of like youre going to buy a car. How much of a discount do you want . Much can i get . How far can i bring the rates down to that is the issue. Not just for corporations but all business entities. If you want the is economy to start advertising the rest of the world this is where you want to do business. It starts with getting the rate down. We need a more competitive capital consumption system, depreciation system. To adopt we have for far too long had a system of taking account when a business buys a piece of equipment how you charge it off over time. And the effect of that has been along with high tax rates to produce highly elevated what is called k is the cherished hear a lot of going forward. And really all it does is puts into one summary statistic the subtotal of all of the effective tax policies affecting the investment. As is how much the various policies raise the price that you have to pay. That is the earnings that you have to have on that piece of capital. Lets say you have a basic level of earnings, you have to have to make investment worthwhile as a business. Then you start figuring out okay, this tax will raise this. This tax will raise this more. The subtotal of those effects is the cost in capital. What we want to see happening in tax reform is the cost of capital to be brought down as far as we can. Reducing tax rates and expensing the two giannas of bringing down the cost of capital. The third piece is fixing the way Tax International income. 20 years ago or so, the industrialized world was pretty mixed. About half of the countries in the world did what we do today. Adopting a worldwide tax system and then and a half adopted a territorial. When i was with chris, we use Different International conferences and will talk about the need for territorial system. Half of the countries we visited with a yes and the others would say thats crazy. And in the us it was thats crazy. It turns out we were right. Most everybody in the world now has some variation on a territorial system. One way to think about it is it is kind of like a las vegas commercial. What happens in vegas stays in vegas. The income that is earned where it is earned, is taxed where it is earned and only there. That is what territorial means. Companies and income in france and germany and japan or china wherever they earn it, it can be subject to whatever taxes are imposed in that jurisdiction. We are not going to test it again in the United States. It is as simple as that. A much simpler system. I think of it in terms of for Corporate Income, getting an exclusion for dividends paid. For it will exclude income from tax. Because it was taxed over there. And if you add text to it, youre making that us operation abroad less competitive and because operations are integrated internationally, it is the is operation where it is closely working with foreign operation. Make the foreign operation less competitive than you make the us operation less competitive. That is the reason why he was socialist countries in europe adopted this. Because they need to compete on a global scale and the only way to do that is to have a competitive tax system. Those are the three key components. There other things that can be done dealing with the estate tax and other elements. Those are all important. The core elements of tax reform significant rate reduction, expensing and a territorial system. Right now if you notice only talk about tax reform whether it is a blueprint or the president s proposals, they tend to revolve around those three pieces. And that is a big part of the reason we have a chance of getting this done fairly quickly. Depending on how you want to look at the calendar, i argue that the 1986 Tax Reform Act is the culmination of an eight year exercise. It actually began with the Capital Gains tax rate reduction and a democratic senator from texas champion and got through and got started thinking about how to redesign the tax system. That is what others ran with that got us the 81 tax cuts and an 86 Tax Reform Act. It was a long process. And part of the reason for such a long process is that the reform bill was an incredibly complicated piece of legislation. Because they try to solve every single tax problem that they could that they had identified. Dealing with limited partnerships or pensions or what have you. This was a comprehensive in the broadest sense of the term, tax reform. If we go down that road right now we have still a great chance of getting tax reform done probably sometime in 2019 or 2020. If you want to get it done soon, which is what we need to do, weve identified key elements. We need to keep it a very focused package. What we need to do to make it stronger and that you are three major things we need to deal with. And that present the next subject of tax reform or tax reform is going to talk about rate reduction and expensing and the great things we do for the economy. But we need to put the big boy pants on to do this. Theyre going to be some big ones with tradeoffs. Off the balance and really think about we want this enough to be worth this tradeoff. Because you cant get a 20 or 25 or 15 percent corporate rate by closing loopholes. Get 200 percent for closing loopholes. You get two or three percent for closing loopholes. If you do this correctly tradeoffs will still leave the overall plan very much progrowth. That will be our focus of the chamber. There will be a lot of fights over the details of the rate reduction. Over how expensing instructor, transition roles how they are applied and designed. 11 details. But the fundamentals will be what is is going to do for the economy . Car brands of tax reform is ultimately about taking the economy that has been growing too slowly to one that is going to grow up to his potential and raise its potential in the short run and longrun. That is what is about. As long as this package looks like you will do that, the us chamber will be supporting and pushing for it. Where it can be made better we will work. But ultimately the bottom line is we will not get caught up in the fractious fighting over the details. The chamber and the Business Community ultimately will focus on does this work for the economy . Is a going to make it stronger . Momentum with comprehensive tax reform are going to be advertising to the world, running commercials on memorial day baseball games to the whole world come to the United States, investor, move your Previous Companies are going to be looking to move overseas. They will be looking to move back. Foreign companies will be looking to move back. This is a place they will want to be. We will be advertising to the world of the tax reform, this is where you want to invest, the sooner you want to be. Come here. For those that dont heed that warning, look out. As they will be competing against the country. Businesses and workers that are armed within the text for that allow them to compete very effectively and we will take on the world and have a very Strong Economy going forward. Thank you very much. [applause] good afternoon. My name is Jason Fichtner with thank you for coming out. Basically we divvy this up. Jq is doing corporate, and then were going to talk about the uk experience and what lessons we can learn. But i want to start my time with some general points on tax reform. Provide you with some Guiding Principles when thinking about tax reform. Then discuss how the house blueprint and president trumps proposals measure up. Im also going to echo a few things that jd said because it is